Analysis of Unilever’s Risks and Risk Management Strategies Essay

With the rapid suppuration of modern economy, companies atomic number 18 al shipway unfastened to attempts which be get into to hale walks of life and non provided exist in the results grocery, but excessively exist in pecuniary grocery store (B tout ensembleou, 2005). It is undoubtedly that jeopardizes jeopardize the beau mondes phylogenesis in that they whitethorn join on the comprise of a confederacys effect and flip it harder for a companionship to shit a crucial decision. Accordingly, it is substantial to know endangerments and find out absorb a chance circumspection st putgies.This look at go forth foremost map out Unilevers duty prototype and consecrate a shortened outline on it. Following this, it go forth illust ordinate special(prenominal)ally happens Unilever is undetermined to in light of the c atomic number 18 model. Mean duration, it allow flush out or so(prenominal) stakes Unilever has not managing enough. Next, the essay will assess close to essay oversight strategies Unilever has taken to palliate or repress the essays. Finally, it will recommend the caller-out close to much(prenominal) than find concern strategies in sanctify to help it mitigate or pr moment risks.Analysis of Unilevers barter molding fear ModelA assembly line model, strictly speaking, is the musical arrangements core logic for creating prevail by (Jane & Susan, 2000). After oer 80 years development, Unilever has become one of the largest suppliers of consumer products in the world. Its watertight portfolio of foods, home and personal cargon brands is bank by consumers the world over. Unilevers vertex 13 brands account for total gross exchanges of over EUR23 billion and top 25 brands represent nearly 75% of the cut-rate sales (Unilever one-year Report, 2009). Unilever is a well-operated familiarity, and its byplay model is mapped out as follows see PartnersSuppliersContractorsDistributorsKey Ac tivitiesenquiryDesignProduction changeValue Proposition stir in advance(p) and unspoiled-quality personal and ho physical exertionhold c atomic number 18 goods for consumers and separate out to make people feel good and comfortable ein truth day Produce and sell nutritious foods, such as tea, ice cream, dressing to people and to make them enjoy a get out life. client RelationshipsDeliver goods to customers via contrary channels customer SegmentsHuge segment of customersCustomers all over the worldKey ResourcesBrands /LabelsEmployeesProduction Sites & Lines engine room Information,Intellectual Property, Embracing Diversity conductMalls SupermartsStores GroceriesPharmaciesTerminal MarketsCost StructureResearch cost, design cost, turnout cost, supply and sale cost, marketing and promotional spend, commission cost Revenue Structure Sales of the consumer goods the caller researches, designs and produces.Analysis of the line of descent ModelThe art model mapped out supra indica tes that a multi-national enterprise like Unilever has an integrated and indwelling concern chain which is global on the one baseball glove, and multi-level on the otherwise go by, that is, its frugalal activities involve employees, suppliers, producers, terminal, terminal markets, retailers, customers and other beneficiaries (Ian, 2009). such(prenominal) line model enables Unilever to become a world top supplier of consumer products. However, from each one coin has two sides. Since the Unilevers business chain connects each other so closely and relates to numerous parties and computes, thus the phoners whole procedure is alternatively vulnerable and is easily rout to various risks.lucks Exposed to Unilever in light of the Business ModelMarket UncertaintiesAs a top supplier of consumer products, Unilevers business activities are operated within a global, expeditious and war-ridden market. Its business development is subject to the condition and change of the whol e market. Firstly, economical condition plays a crucial office staff on the development of Unilevers business as consumption demand and bribe ability of consumers at once influence the sale of the products. 2008 and 2009 were relatively tough years for Unilever collect to the global economic crisis (Unilever one-year Report, 2009).The economic downturn reduces consumers wealth and makes them unable to obtain as m whatsoever products as before. Mean patch, customers demoraliseing ability was greatly disobeyd and turned to buy those inexpensive but substantial products rather than those top-grade products. Customers reactions affect Unilevers disturbance, moolah and coin track down. Next, more and more companies are targeting the market of consumer goods overdue to the attraction of billions of consumers. Thus, the market of consumer goods is just like a trammel of pie and is shared by more and more competitors. Therefore, the whole market is uncertain and Unilever ha s to be well prepared for the fight against the economic uncertainties and the industrial fierce competition.Financial instabilityThe engross rate risk is a risk brought to the value or the bullion flow or profitability of a society when the change of the delight rate occurs. To clarify it more specifically, the floating bear on rate exposes the confederation to the risk of the change magnitude fill cost and the increased borrow afterwards while the fixed interest rate makes the caller-up subject to the risk of the dismissal of the fair value.Meanwhile, as a multinational conjunction whose business activities are operated in more than 180 countries, Unilever is undetermined to the risk of the magnetic variation of the exchange rate during the form of the change of currencies and the actual value of the currency whitethorn be change magnitude due to such fluctuation (Unilever Annual Report, 2009). Provided that Unilever does not handle the issue of interest rate an d exchange rate well, the go with may be subject to the video of the reduction of money flow, turnover, profits which may subsequently contraryly impact the familys credit rating, ability to entrap bloodlines and confidence of investors.Environmental take chancesAs a top producer of consumer goods, some waste water is generated for inclination and the family also discharges some carbon dioxide from energy that the phoner uses in the mould of the production (Unilever Annual Report, 2009). In cuticle the said issues are not dealt with appropriately, the surround will believably be polluted. peerless of the Unilever factories in Brazil discharged a great deal of stink olfactory modality to the air due to the false operation in 2008 which impacted upon more than vitamin C thousand peoples popular life and Unilever was imposed a ticket of 10 million Brazilian accepted by the Brazilian government due to such pollution (Unilever Annual Report, 2009). same accidents wi ll greatly damage the study of the confederation as not solo the government but also jet peoples awareness of environmental protection has been greatly improved nowadays. Accordingly, Unilever is exposed to the environmental risk which may direct in the heavy fine and adverse report.Loss of CustomersUnilevers extraordinary doing obtained nowadays is on the one hand be stupefy of the superior products it supplies and on the other hand is in divisible to the customers fitting send of the social club and its brands. However, the following three factors may undermine customers trust to the company and its brands a. Products fail to fill up high product resort standards. fiber inspectors in each state ingest influence many standards and are doing lot of inspection work to en sure the safety of products sold in the market.In en teddy the product is found insecure or with any shortcomings, customers will feel disappoint b. deficiency of new- do products and technical ca pability. Customers have quite high requirements on products. Lack of new products and technical capability will push customers to other supplier of similar consumer goods c. The service and product provided by the competitive company is better than Unilever. Loss of customers trust may be caused by several(prenominal) reasons, while the result is simply the disadvantage of the companys cash flow and the damage of the companys result and profitability.Operation riskinessEach clapperclaw of Unilevers business activity is separable to each other (Unilever Annual Report, 2009). For example, the companys production of goods is conditioned by the timely and secure supply of the raw-material, while the successful sale of goods require telling computer memory and scattering capability. However, the supply of the companys raw material, mostly culture products, is based on the secure and sufficient agricultural production which may be influenced by weather, water scarcity, and farm ing practices. Similarly, the storage and distribution of products is usually influenced by the storage and distribution capability, the cost of it and the topical anesthetic inletible stability. Any issue of the foregoing may badly influence Unilevers universal production and sale and subsequent cash flow, turnover, and profit and other business indexes. endangerment of Employees and TalentsUnilever is a company with more than ccc operation agencies in 88 countries, more than 1000 well-known brands and sells its products in more than 150 countries. Thus the successful operation of the company not only depends on the superior products, but also unavoidably appropriately qualified employees. In the event that the company suffers high employment turnover rate, it may be exposed to the risk of high cost of cogwheeling, suspended market share and loss of some investment funds opportunities which will impact the smooth development of the company and undermine the companys capabilit y of competitiveness in the market. juristic riskinessUnilever is doing business in more than 150 countries. Different coun filter has very different legal strategy and regulations concerning the employment, the product safety, the pricing, the intellectual property rights, the disclosure, the environment and other factors (Ian, 2009). Legal risk may probably bring a suit to the company and will do harm to the companys reputation in local market.Other bumps exposed to but not identified or Elaborated by Unilever Unilever has found out and elaborated some risks exposed to the company however, there are some risks which have not stirred Unilevers great attention put on the line of bleak products ExploitationIn order to confront the industrial competition, Unilever needfully to bug continually new products to attract customers and unite the relationship with customers. The exploitation of a new product basically involves following steps design, research, selection of the schem e, the involvement and allocation of the resources, the production and promotion of the products. However, there are some uncertain factors existing in the process of new products exploitation, such as technology, market, fund and environment and each uncertain factor may lead to the unsuccessful exploitation, loss of cost or negative reputation to the company (Michel, 2001).Physical RiskA company is unavoidably exposed to some natural disasters or accidents (Jane, 2000), such as fire, windstorm or earthquake which will cause the property damage or employees clay disfigurement. Such damage or injury will cause the companys normal operation affected and subsequently, turnover, cash flow and profitability will be impacted.Other risksThe company is also exposed to other risks such as fiscal, revenue enhancement and so on.Interaction of Risk Factors economical Downturn Market Uncertainties Risk of bleak Product Exploitation Financial unstableness Legal Risk Loss of Customer s Risk of Employees and Talents Operation Risk All risks illustrated above do not exist individually but rather influence interactively (Geert, 2008). The economic downturn will lead to the financial instability which may cause the company to operate adversely and the subsequent piteous operation may cause the company to face more fierce industrial competition and environmental risk. The said issues are easy to lead to the loss of employees and talents which may also subsequently lead to slimy operation and vice versa. To sum up, the factors design with each other and the company has to take some effective and holistic measures to admit these risks.Assessment of Unilevers Risk guidance Strategies Unilever has recognise that most of the risks exposed to it may become material obstacles to the companys further development. Accordingly, it has tried to taken some effective and structured measures to make and and then exploit the key risk guidance strategies for the busines s (Michael, 2007). The specific risk trouble strategies it has exploited are as follows1. Unilever has been cautiously monitoring economic indicators and consumer behavior in different areas finished extensive and nonrecreational research in order to respond quickly and take new and on the table measures to meet the changing demand of customers.2. In order to deal with the issue of financial instability, the company has been fashioning efforts to get access to global debt markets through various ways such as short-term or long-term debt programs. Unilever attaches great importance to the fluctuation of interest rate, trying to have different types of financial services and balance the risks amid floating and fixed rate interest after a professional prophecy and assessment of the interest rate Regarding to the contrary exchange rate, Unilever sets a insurance which limits the in operation(p) companies financial foreign exchange exposures so as to minimize such risk. 3. Unile ver has made a series of standards and policies for the procedure of design, manufacture, and distribution of products to ensure the high standards of products quality.Unilever also has a Sustainable Development Group which is comprised of fivesome external specialists, engaging in the companys development of the strategy. Unilever also has specific policy concerning products recall in case theres products quality incident. 4.Unilever has set complete and effective contingency measures and system to ensure the material supply or to share the production task surrounded by different production sites or to use substitute materials in case of the escape of the material. The company also calculates the cost of conveyancing and distribution from time to time and to even up the policy and service promptly to hone the cost. These measures enable the company to operate well. 5. Unilever needs to find a way to attract, develop, train and retain qualified employees.The company has an adm iring forgiving resource system. It has established Resource military commissions to identify employees skill and capability, define employees career paths. It also provides numerous opportunities for employees to improve their skills, leadership abilities through training and coaching. Meanwhile, Unilever shall take measures to enhance employees risk counsel ability. Ballou and Heiger (2005) propose alter the employees attitudes about risk heed to include monitoring, measuring, and controlling certain risks while sharing, avoiding, and accepting that other risks will not occur effectively in a short period of time.6. Unilever has set policies to make sure employees follow policies and assume by local laws and regulations in all relevant aspects concerning its business and activities. Regarding those crucial issues and activities, the antecedent legal check and consent are needed in the company. In a word, Unilever has been making great efforts to build effective, mediocre a nd practicable strategies for risk anxiety. The notices have overall responsibility for Unilevers risk do itment and the company has a Code of Business Principles which stipulates the standards of business operation and requires employees to abide by the code. The above strategies enable Unilever to operate its business well in the global market.New Risks Exposed to Unilever and Recommended Risk Management Strategies in any event risk management strategies mentioned above, the writer will recommend some more strategies for Unilever and try to fountain it some ideas onbetter monitor and manage its risks.Transfer and deviate RisksIn order to avoid the alter and losses brought by such risks to the development of the company, Unilever may select to assign risks by applying for insurance. Modern insurance system is the wishful thinker way to transfer risks (Mike, 2006). For example, Unilever may transfer the risks of property, employers liability and business interruption by app lying for the insurance of Property All Risks, Employers Liability and Business Interruption so as to transfer risks to the insurance company. imbed an Effective Control SystemRisk management is not only to establish a risk management for business procedure, more importantly, the company shall establish a comprehensive and effective risk management control system to make sure the effective implementation of the risk management strategy. The company seat establish a Risk Management Committee in the head office and shall be directly creditworthy for the board of directors. The board needs to be consulted on social functions of risk management and it needs to be able to give guidance to the risk management deputation in its deliberations. To do this effectively the board needs to ensure the whole company is engaged in managing risk, thereby making it an intrinsic part of the company culture.(Corporate plaque An global Review, 2009, 546-558). The function of the Risk Management Com mittee is to implement the risk management, to be especially responsible for the risk supervision of the whole company and to make unified risk management policy and procedure each branch of the company shall establish an independent risk supervisor, responsible for the risk management and to report the matter of risk to Risk Management Committee without consent of the local manager.Establish a Database of Risk AccidentsDatabase of risk accidents is a stopcock to effectively predict and assess the risk. The data in the database shall include both congenital and external data concerning risk accidents. We can try to estimate how bad this problem is by looking at the historical severity of these events in relation to anyrisk factors that we define and then examining the preponderance of these risk factors(Michel, Dan and Robert, 2001). Through correct analysis of such data, the company will consider a lesson and consider its risk management policy and procedure so as to judge w hether the company will hold open the occurrence of the risk accident and how to take precautious measures to avoid the occurrence of similar accidents. refinementIn conclusion, risks exist in the whole process of business operation, any company shall attach great importance to the risk management to effectively predict and avoid the risk. Unilever is a company which has well recognized its major risks and taken effective risk management strategies. Research on risk and risk management strategy is a long journey and need all employees of the company to make effort and abide by the policy and standards to monitor and manage risks proactively.ReferencesBallou, B. & Heitger, D. L.2005. A building-block approach for implementation COSO enterprisingness risk management-integrated framework. Management Accounting Quarterly, 6(2)1-10.Geert Bouckaert and flush toilet Halligan, 2008, Managing performance international comparisons. Routledge, 2008, pp221-225.Ian Brown, Adam Steen, and Juli e Foreman. 2009. Risk Management in Corporate Governance. A Review and Proposal Corporate Governance An International Review, 2009, 17(5)546-558.Jane Linder, Susan Cantrell, 2000, Changing Business Models canvass the Landscape, Business Publisher Accenture, Pages 1-15Michel C., Dan G. and Robert M., 2001, Risk Management, McGraw-Hill.Michael R. Czinkota, Ilkka A. Ronkainen, 2007, International marketing, Cengage Learning, 2007, p417-422.Mike Walker. 2006. Managing international risk. International Business Briefings. The Institute of Risk Management. 2006. P 5-6.Unilever Annual Report, 2009, Unilever Annual Report, fromhttp//annualreport09.unilever.com/downloads/Unilever_AR09.pdf (Accessed on May, 25, 2011)