Analysis of Unilever’s Risks and Risk Management Strategies

Among the outgrowths in the United States is the Sarbanes-Oxley Act of 2002, and similar legislation has been enacted or is being considered in other countries. This law extends the long-standing requirement for public companies to maintain systems of internal control, requiring management to certify and the independent auditor to attest to the effectiveness of those systems. Internal Control – Integrated Framework, which continues to stand the test of time, serves as the broadly accepted standard for satisfying those reporting requirements. This Enterprise Risk Management – Integrated Framework expands on internal control, providing a more robust and extensive focus on the broader subject of enterprise risk management. While it is not intended to and does not replace the internal control framework, but rather incorporates the internal control framework within it, companies may decide to look to this enterprise risk management framework both to satisfy their internal control needs and to move toward a fuller risk management process. Among the most critical challenges for managements is determining how much risk the entity is prepared to and does accept as it strives to create value. This report will better enable them to meet this challenge.

Exchange rate risk, also called as ‘currency risk’ is the risk arising from currency fluctuations. Volatile exchange rates can reduce cost and productivity advantages gained over years of hard work. Firms exposed to international economy face this risk. When a firm has already committed to a foreign currency denominated transaction, the firm is exposed to a exchange rate risk. The firm will incur a

Unilever Global is a company dedicated to producing quality and nutritionally balanced foods to indulgent ice creams, affordable soaps, luxurious shampoos and everyday household care products. They also produce world-leading brands which include Lipton, Knorr, Dove, Axe, Hellmann’s and Omo, alongside trusted local names such as Blue Band, Pureit and Suave. Furthermore, Unilever Global is one of the world’s leading fast-moving consumer goods companies with products sold in over 190 countries. Arguably, more than 2 billion consumers worldwide use a Unilever product on any given day. According to its website, the vision of Unilever is “to make sustainable living commonplace place, working to create a better future every day,

Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life’. The corporate strategy is of focusing on core businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of €39.6 billion and net profit of €3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organization with its top management coming from 24 nations. Internationalization is based on the principle of local roots with global scale aimed at becoming a ‘multi-local

The interest rate price risk is the risk that the interest rate will increase over time and will cause the bond to lose its value in the market. If the interest rate price risk ends up decreasing over time the

Unilever will want to regenerate their product so that they will be able to be the market leaders for the product again, this is going to be essential for some products where they rely on the business being a good market leader for most of their products. The shareholders will want to know about the business as they will want to have the business sot be the market leader for the company and they will also want to have the product regenerated as quick so that sales are not hit too effectively. They will also want the product to review and test why it has become a decline in sales to make sure that they are going to stop it from happening to other

Unilever Sri Lanka is multi-national company which providing 400 brands spanning 14 categories of home. The company product portfolio includes different worldly recognized brands such as Lipton, Knorr, Dove and Omo. Moreover, Unilever spend €1 billion every year for research and development and owning five laboratories around the world in order to encourage and explore mew things. Further, Unilever consider the customer research as vital part of the organization as it gives the feedback of customers about their current and new products. In present 174000 people work under the Unilever as employees and support thousands of distributors, contractors, and suppliers for their career. Thus, companys’ oral brands such as Mentadent, Peposodent and

Operation of Unilever around the world starts fragmenting, but Unilever continues to expand globally and investment made in R&D is increased.

This report aims to analyse the financial position of Unilever PLC within its daily operating activities and it also compares the company’s performance with its key competitor, the Proctor and Gamble Company (P&G). The report also includes background of both the companies and an industry overview. To better understand the performance of both the companies, the segmental analyses have been done for both region and products. Due to the global crisis, Unilever and P&G both are facing price rise and inflation pressures, also instability in the Eurozone. All these factors are strongly impacting their operation activity and long-term growth decision plan. Finally After a careful examination of the financial ratios of both the companies, we recommend Unilever as a good company to invest as compared to P&G .The reasons for the following can be seen in the report below.

Collier (2009) claims that the fundamental role of the Board of the directors in a company is to apply risk management and to review the performance of the organisations’ internal control procedures; these two principal processes will support the Board in the setting of the strategic targets, the transformation of the targets into real products and services, the effective business overseeing, and the realistic reporting to the external stakeholders. Apart from the Board, the author suggests that an effective risk management framework must be facilitated by a risk management group, a chief risk officer, external and internal audits, and a mature organisational culture disseminated to the line managers and employees. Under the same concept, Hampton (2009) presented a flow gram that suggests the path towards the establishment of enterprise risk management, starting from the risk recognition and ending to the standardization of a risk evaluation process, having prior involved the Board, the risk owners and the accountable staff.

For Riordan to adopt COSO Enterprise Risk Management (ERM) practices in a new initiative, they are more likely to have a successful implementation if they have the full support of the board and chief executives. The ERM plan should not only be compatible with existing organizational goals, it must also be integrated into the culture so that risk management can become salient at all levels of the organization. Even though risk management should be spread throughout the culture, the aims of the program should be concise and focus on a small number of the top risks. Two of these risks that should definitely be among the top of the list are compliance and legal liability that might arise from the company's operations. This report will outline some of the key concepts that should be embodied in the new COSO strategy at Riordan.

References:Rawls S W, Smithson C W. Strategic risk management. Journal of Applied Corporate Finance, 1990, 1:6-18)Brealey, R., and Myers, S. (2002) Principles of Corporate Finance, 6th edition, NewYork: McGraw-Hill Higher Education.

In 2000, Unilever decided to reduce 1,600 brands down to 400 and then select a small number of them to serve as “Masterbrands”. One of the reasons to have fewer brands is to decrease control issues. It is harder to manage so many brands, especially when each one has its own particularities. As Deighton pointed, Unilever’s brand portfolio had grown in a relatively laissez-faire manner. In other words, the company’s brands were created without large interference.

An overall risk profile of the company based on current economic and industry issues that it may be facing.

Nestle Risk Management Centre was created in 2001 to coordinate activities related to risk management in Quality, Security, Treasury, Compliance, Operations, and IT etc. Overall objective of risk management process at Nestle is appropriate management of risks, which could have a material impact on Nestle business. Nestle risk management process covers Enterprise Risk Management, which is designed to identify, communicate, and mitigate risks in order to minimise their potential impact on the Group. Nestlé has adopted a dual approach in identifying and assessing risks. A top-down assessment is performed at Group level once a year to create a good understanding of the company’s mega-risks, to allocate ownership to drive specific actions around