Risk Management Techniques Research Paper
With the volatile and unpredictable nature of the business world today it has become imperative to be as prepared as possible to manage potential liabilities within a company through extensive and thorough assessment and analysis of every foreseeable risk, as well as attempting to provide backup plans for any unforeseen situations at the same time. This is a complicated and diverse aspect of any company, and is especially complex in an organization such as Unilever, a globally active company with many facets to consider when creating risk management strategies and policies. This case study intends to provide a detailed overview of their current risk management techniques, the tools they utilize in implementing these strategies and what changes, if any, could be made to better improve their risk management procedures.
As discovered in the coursework (Saylor Academy, 2012), holistic risk management involves the use of four stages that create a fully encompassing overview of the full strategy. These stages are the Identification stage, Assessment stage, Solution Sourcing and Implementation stage and the Evaluation stage. Unilever excels in operating their business to embrace a wide range of intricate processes that encompass all phases of management, from strategizing, planning, executing the strategies developed and managing performance. Within every stage of their business cycle, risk management has been incorporated to ensure that Unilever’s risk management procedures remain competitive and sustainable. The Executive Board members and the Committees that advise them review significant risks on a regular basis to assess the material impact these decisions could have on Unilever. These reviews assess the full scope of risk Unilever is prepared to take as they pursue their goals, and the Boards will also attempt to mitigate the full risk exposure in order to lessen the potential impact of these risks. (Unilever, 2015)
Identification of Unilever’s Risks
This stage involves looking at every aspect of the company in segments, and attempting to find every possible way they can fail, every single element that can negatively impact the company or its supply chain, and identifying every threat there is to every aspect of the company. This will provide an accurate overview of the extent to which the company can be negatively affected in order to effectively begin the assessment and solution phase of risk management.
Brand Preference
Unilever depends heavily on supplying innovative products that meet consumers’ needs in an ongoing fashion. This can be complicated to achieve due to the ever-changing consumer trends, and if the company cannot innovate effectively, Unilever could be negatively affected in both sales and margins.
Portfolio Management
Being a global company with a large portfolio of brands, countries and supply chain channels, if Unilever neglects the importance of optimized strategic investments, opportunities for company growth would be overlooked.
Sustainability
This is an area that remain important to Unilever as one of the core foundations of their company is creating long-term sustainable business, which depends on the development and sourcing of sustainable business solutions that will support this ongoing growth.
Customer Relationships
Unilever’s handling of their customers is vital to the ongoing success of the business and its continued growth. Should they fail to keep building these relationships effectively, the long-term goals of sustainability will be negatively affected as the products Unilever supplies will no longer be purchased by their customers, and consumers will not be able to benefit due to a products no longer being available.
Talent & Organization
Unilever makes use of a wide talent pool to achieve the diverse yet integrated supply chain, attracting, developing, organizing and finally retaining this talent has proven to be critical in securing constant, reliable growth of the company.
Supply Chain
Unilever’s supply chain can be affected by many potential threats that can negatively influence their ability to deliver quality products with a view to building a sustainable supply of these products. Some of these threats are physical disruptions, negative impact of environmental disasters and major industrial accidents. The costs of Unilever’s products can also be affected by the costs of raw materials, and such fluctuations are not always passed down the chain to the consumer via the price of the product in the shop.
Safe and High Quality Products
The safety of the company’s products can be directly linked to Unilever, a dream with which to rebuild an individual’s faith in the items supplied to and from me in an attempt to mitigate ongoing losses.
Treasury and Pensions
The relative values of currencies can fluctuate widely, and as can be observed, a highly integrated financial policy is in place in order to ensure that the company consolidates its financial statements along with its use of private funds. Unilever is influenced by exchange controls that are put in place in certain countries, these exchange policies often limit the freedom to import materials purchased in a foreign currency. This leaves Unilever vulnerable to potential exchange rate errors that would result in a decrease in investor confidence in the company and increase Unilever’s fund raising restrictions.
Assessment of Unilever’s Risks
The assessment process encompasses a variety of important steps in itself, from forecasting the frequency of the risk occurring and analysis the severity of the risk, to analyzing the financial implications of the risk and the potential impact that an occurrence or reoccurrence of the risk could have on the company. Unilever has approached this assessment as a part of their everyday company strategy, incorporating ongoing gathering of data into each phase of its supply chain, has left the company with a real-time overview of the risks involved at all times.
Implementation of Solutions to Unilever’s Risks
Once a full analysis has been conducted on each risk, the company begins to source risk mitigating solutions, mitigating risks and implementing loss-control and insurance programs to manage each risk according to its individual uniqueness in a flexible and comprehensive manner.
The methods Unilever uses to mitigate each of the risks that influence the company are straightforward and carefully implemented. Firstly property risk is greatly minimized through the indirect manner in which Unilever produces their products. By reducing the company’s exposure to property risks through carefully thought their risk avoidance techniques, these risks are then born by Unilever’s supplier, whom Unilever then thoroughly supports throughout every endeavor in mitigating supplier property risks without fully exposing themselves as a company to that risk.
One risk that Unilever does take exceedingly seriously, is that of employee benefits. This risk is handled with a combination of transferred risk and avoidance techniques, with the former being the most involved as the company adheres to strict pension investment standards that involve the investment of various treasury funds over a diverse portfolio of equities, bonds, and alternative assets to ensure that the failure of any one of these investments will not result in the complete loss of all investments. These procedures are overseen by external fund managers, under the watchful eyes of pension trustees and central pensions and investment teams, in a careful combination of risk transfer and risk avoidance.
Evaluation of Unilever’s Risk Management Strategy
The evaluation process refers to the sage where the risk manager re-assess the risks once the mitigating procedures are in place, evaluating as to whether or not the solutions implemented are in fact effective, analyzing on an ongoing basis the impact the risks still have on the company, and attempting to further mitigate losses by adjusting the risk management strategy according to the prior strategy’s performance and efficiency. Unilever has instilled these evaluation techniques into the everyday scope of business, automating the collection of data, interactions of the company’s entire supply chain in response to risk exposure, and allowing the Board’s a broad perspective of the actual interactions of the company versus the risks the company faces.
Conclusion
Given that Unilever is such a globally integrated company, with suppliers in many diverse jurisdictions, and consumers that fall under the governance of still more diverse legal entities, it is imperative that they manage their risks with great care and flexibility in order to remain a leading global company. This has been accomplished by utilizing a combination of risk avoidance techniques and risk transference methods in order to remain as distanced from the impact of risks as possible while still indirectly supporting their strategic risk mitigation solutions in order to provide the best possible security against potential threats that might negatively impact the sustainability of Unilever’s ongoing growth.
References
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (Vol. 1.0). Retrieved from https://2012books.lardbucket.org/books/enterprise-and-individual-risk-management/
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (chapter 11).
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (chapter 12).
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (chapter 15).
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (chapter 16).
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (chapter 4).
Saylor Academy. (2012). Risk Management for Enterprises and Individuals (chapter 5).
Unilever. (2015). Unilever Annual Report and Accounts . Retrieved from https://www.unilever.com/Images/risks-ar15_tcm244-477397_en.pdf
