Unilever 2014 Annual Report Download - page 15

DESRIPTION OF RISK WHAT WE ARE DOIN TO MANAE THE RISK
BUSINESS TRANSFORMATION
Successful execution of business transformation proects is
key to delivering their intended business benefits and avoiding
disruption to other business activities.
Unlever s contnually engaged n maor change proects, ncludng
acqustons and dsposals and outsourcng, to drve contnuous
mprovement n our busness and to strengthen our portfolo and
capabltes
Falure to execute such transactons or change proects
successfully, or performance ssues wth thrd party outsourced
provders on whch we are dependent, could result n under-delvery
of the expected benefts Furthermore, dsrupton may be caused n
other parts of the busness
All acqustons, dsposals and global restructurng proects
are sponsored by a member of the Unlever Leadershp Executve
Regular progress updates are provded to the Unlever
Leadershp Executve
Sound proect dscplnes are used n all merger, acqustons,
restructurng and outsourcng proects and these proects are
resourced by dedcated and approprately qualfed personnel
The performance of thrd party outsourced provders s kept under
constant revew, wth potental dsrupton lmted to the tme and
cost requred to nstall alternatve provders
Unlever also montors the volume of change programmes under
way n an effort to stagger the mpact on current operatons and
to ensure mnmal dsrupton
EXTERNAL EONOMI AND POLITIAL RISKS AND
NATURAL DISASTERS
Unilever operates across the globe and is exposed to a range
of external economic and political risks and natural disasters
that may affect the execution of our strategy or the running of
our operations.
Adverse economc condtons may result n reduced consumer
demand for our products, and may affect one or more countres
wthn a regon, or may extend globally
overnment actons such as fscal stmulus, changes to taxaton
and prce controls can mpact on the growth and proftablty
of our local operatons
Socal and poltcal upheavals and natural dsasters can dsrupt
sales and operatons
In 2014, more than half of Unlever’s turnover came from emergng
markets ncludng Brazl, Inda, Indonesa, Turkey, South Afrca,
China, Mexico and Russia. These markets offer greater growth
opportunities but also expose Unilever to economic, political
and social volatility in these markets.
The breadth of Unilever’s portfolio and our geographic reach
help to mitigate our exposure to any particular localised risk
to an extent. Our flexible business model allows us to adapt
our portfolio and respond quickly to develop new offerings
that suit consumers’ and customers’ changing needs during
economic downturns.
We regularly update our forecast of business results and cash
flows and, where necessary, rebalance investment priorities.
We have continuity planning designed to deal with crisis
management in the event of political and social events and
natural disasters.
We believe that many years of exposure to emerging markets
have given us experience operating and developing our business
successfully during periods of economic, political or social change.
TREASURY AND PENSIONS
Unilever is exposed to a variety of external financial risks in
relation to Treasury and Pensions.
Changes to the relative value of currencies can fluctuate widely
andcould have a significant impact on business results. Further,
because Unilever consolidates its financial statements in euros it
issubject to exchange risks associated with the translation of the
underlying net assets and earnings of its foreign subsidiaries.
We are also subject to the imposition of exchange controls by
individual countries which could limit our ability to import materials
paid in foreign currency or to remit dividends to the parent company.
Currency rates, along with demand cycles, can also result in
significant swings in the prices of the raw materials needed
to produce our goods.
Unilever may face liquidity risk, ie difficulty in meeting its obligations,
associated with its financial liabilities. A material and sustained
shortfall in our cash flow could undermine Unilever’s credit rating,
impair investor confidence and also restrict Unilever’s ability to
raise funds.
Currency exposures are managed within prescribed limits and by
theuse of forward foreign exchange contracts. Further, operating
companies borrow in local currency except where inhibited by
local regulations, lack of local liquidity or local market conditions.
We also hedge some of our exposures through the use of foreign
currency borrowing or forward exchange contracts.
Our interest rate management approach aims to achieve an optimal
balance between fixed and floating rate interest exposures on
expected net debt.
We seek to manage our liquidity requirements by maintaining
accessto global debt markets through short-term and long-term
debt programmes. In addition, we have high committed credit
facilities for general corporate purposes.
Group treasury regularly monitors exposure to our banks, tightening
counter-party limits where appropriate. Unilever actively manages
its banking exposures on a daily basis.
52 Unilever Annual Report and Accounts 2014Governance
RISKS CONTINUED