Pepsi 2013 Annual Report Download - page 56

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38
mitigate the unfavorable impact, if any, on our future results. See also “Risk Factors” in Item 1A., “Executive
Overview” above and “Market Risks” below for more information about these risks.
Risk Management Framework
The achievement of our strategic and operating objectives necessarily involves taking risks. Our risk
management process is intended to ensure that risks are taken knowingly and purposefully. As such, we
leverage an integrated risk management framework, which is designed to identify, assess, prioritize, address,
manage, monitor and communicate risks across the Company’s operations. This framework includes:
• PepsiCo’s Board of Directors is responsible for overseeing risk assessment and mitigation. The
Board receives updates on key risks throughout the year. The Board has delegated oversight of certain
categories of risk to designated Board committees which report to the Board regularly on matters
relating to the risks the committees oversee.
The Audit Committee of the Board of Directors reviews and assesses the guidelines and
policies governing PepsiCo’s risk management and oversight processes and assists the
Board’s oversight of financial, compliance and employee safety risks facing PepsiCo; and
The Compensation Committee of the Board periodically reviews PepsiCo’s compensation
policies and practices to assess whether such policies and practices could lead to unnecessary
risk-taking behavior.
• The PepsiCo Risk Committee (PRC), which is comprised of a cross-functional, geographically
diverse, senior management group which meets periodically to identify, assess, prioritize and address
strategic, financial, operating, business, compliance, safety, reputational and other risks;
• Division Risk Committees (DRC), comprised of cross-functional senior management teams which
meet regularly to identify, assess, prioritize and address division-specific business risks;
• PepsiCo’s Risk Management Office, which manages the overall risk management process, provides
ongoing guidance, tools and analytical support to the PRC and the DRCs, identifies and assesses
potential risks and facilitates ongoing communication between the parties, as well as with PepsiCo’s
Board of Directors and the Audit Committee of the Board;
• PepsiCo Corporate Audit, which evaluates the ongoing effectiveness of our key internal controls
through periodic audit and review procedures; and
• PepsiCo’s Compliance & Ethics Department, which leads and coordinates our compliance policies
and practices.
Market Risks
We are exposed to market risks arising from adverse changes in:
• commodity prices, affecting the cost of our raw materials and energy;
• foreign exchange risks and currency restrictions; and
• interest rates.
In the normal course of business, we manage these risks through a variety of strategies, including productivity
initiatives, purchasing programs and hedging strategies. Ongoing productivity initiatives involve the
identification and effective implementation of meaningful cost-saving opportunities or efficiencies, including
the use of derivatives. Our global purchasing programs include fixed-price purchase orders and pricing
agreements. See Note 9 to our consolidated financial statements for further information on our non-cancelable
purchasing commitments. Our hedging strategies include the use of derivatives. Certain derivatives are