Unilever 2014 Annual Report Download - page 16

DESRIPTION OF RISK WHAT WE ARE DOIN TO MANAE THE RISK
We are exposed to market nterest rate fluctuatons on our floatng
rate debt Increases n benchmark nterest rates could ncrease
the nterest cost of our floatng rate debt and ncrease the cost
of future borrowngs
In tmes of fnancal market volatlty, we are also potentally exposed
to counter-party rsks wth banks, supplers and customers
Certain businesses have defined benefit pension plans, most now
closed to new employees, which are exposed to movements in
interest rates, fluctuating values of underlying investments and
increased life expectancy. Changes in any or all of these inputs
could potentially increase the cost to Unilever of funding the
schemes and therefore have an adverse impact on profitability
and cash flow.
We regularly assess and monitor counter-party risk in our
customers and take appropriate action to manage our exposures.
Our pension investment standards require us to invest across
a range of equities, bonds, property, alternative assets and cash
such that the failure of any single investment will not have a material
impact on the overall value of assets.
The majority of our assets, including those held in our ‘pooled’
investment vehicle, Univest, are managed by external fund
managers and are regularly monitored by pension trustees
and central pensions and investment teams.
Further information on financial instruments and capital
and treasury risk management is included in note 16 on pages
114 to 119.
ETHIAL
Acting in an ethical manner, consistent with the expectations
of customers, consumers and other stakeholders, is essential
for the protection of the reputation of Unilever and its brands.
Unilever’s brands and reputation are valuable assets and the
way in which we operate, contribute to society and engage with
the world around us is always under scrutiny both internally
and externally. Despite the commitment of Unilever to ethical
business and the steps we take to adhere to this commitment,
there remains a risk that activities or events cause us to fall
short of our desired standard, resulting in damage to Unilever’s
corporate reputation and business results.
Our Code of Business Principles and our Code Policies govern the
behaviour of our employees, suppliers, distributors and other third
parties who work with us.
Our processes for identifying and resolving breaches of our Code of
Business Principles and our Code Policies are clearly defined and
regularly communicated throughout Unilever. Data relating to such
breaches is reviewed by the Unilever Leadership Executive and by
relevant Board committees and helps to determine the allocation
of resources for future policy development, process improvement,
training and awareness initiatives.
LEAL AND REULATORY
Compliance with laws and regulations is an essential part
of Unilever’s business operations.
Unilever is subject to local, regional and global laws and regulations
in such diverse areas as product safety, product claims, trademarks,
copyright, patents, competition, employee health and safety, the
environment, corporate governance, listing and disclosure,
employment and taxes.
Failure to comply with laws and regulations could expose Unilever
to civil and/or criminal actions leading to damages, fines and
criminal sanctions against us and/or our employees with possible
consequences for our corporate reputation.
Changes to laws and regulations could have a material impact
on the cost of doing business. Tax, in particular, is a complex area
where laws and their interpretation are changing regularly, leading
to the risk of unexpected tax exposure.
Unilever is committed to complying with the laws and regulations
of the countries in which we operate. In specialist areas the relevant
teams at global, regional or local levels are responsible for setting
detailed standards and ensuring that all employees are aware
of and comply with regulations and laws specific and relevant
to their roles.
Our legal and regulatory specialists are heavily involved in
monitoring and reviewing our practices to provide reasonable
assurance that we remain aware of and in line with all relevant
laws and legal obligations.
We have a Tax Risk Framework in place which sets out the
controls established to assess and monitor tax risk for direct
and indirect taxes.
53Unilever Annual Report and Accounts 2014 Governance