News & Insights

Directors Governance Center

July 7, 2014

Lululemon: A Sheer Debacle in Risk Management (Stanford Closer Look Series)


The Stanford Closer Look Series recently published a case study of the risk oversight issues associated with Lululemons highly publicized product quality issues. In , the case study authors highlight the fact that, while boards and managers recognize the importance of risk management, recognizing the importance of risk management is not the same as effectively managing and overseeing risk.

Among other matters, this case study identifies the following key questions that directors should consider with respect to their risk oversight functions:

*Identifying vs. Reducing Risk: There is often a disconnect between identifying risks in advance and being prepared to manage them when they materialize. Accordingly, how can companies implement a risk management program that is actually effective in reducing risk?

*Tracking and Responding to Risk: How can directors satisfy themselves that a company has a reliable way to track and respond to strategic risks? What type of analysis and reporting would provide this assurance?

*Social Media Risk: How can directors satisfy themselves that a company has a reliable way to track and respond to social media risk? What type of analysis and reporting should they rely on?

*Board Level Issue: When do risk-related matters become a board level issue? At what point should the board intercede to monitor or change a companys response?

The is a collection of short case studies that explore topics, issues and controversies in corporate governance and leadership. The Closer Look Series is published by the Corporate Governance Research Initiative at the Stanford Graduate School of Business and the Rock Center for Corporate Governance at Stanford University.