Unilever 2011 Annual Report Download - page 34

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Description of risk What we are doing to manage the risk
External economic and political risks, and natural disasters
Unilever operates across the globe and is exposed to a range of The breadth of Unilever’s portfolio and our geographic reach help to
external economic and political risks and natural disasters that may mitigate our exposure to any particular localised risk to an extent. Our
affect the execution of our strategy or the running of our operations. flexible business model allows us to adapt our portfolio and respond
quickly to develop new offerings that suit consumers’ and customers’
Adverse economic conditions may result in reduced consumer changing needs during economic downturns.
demand for our products, and may affect one or more countries
within a region, or may extend globally. We regularly update our forecast of business results and cash flows
and, where necessary, rebalance investment priorities.
Government actions such as fiscal stimulus, changes to taxation and
price controls can impact on the growth and profitability of our local We have continuity planning designed to deal with crisis management
operations. in the event of political and social events and natural disasters.
Social and political upheavals and natural disasters can disrupt We believe that many years of exposure to emerging markets has
sales and operations. given us experience operating and developing our business
successfully during periods of economic, political or social change.
In 2011, more than half of Unilever’s turnover came from emerging
markets including Brazil, India, Indonesia, Turkey, South Africa,
China, Mexico and Russia. These markets offer greater growth
opportunities but also expose Unilever to economic, political and
social volatility in these markets.
Eurozone risk
Issues arising out of the sovereign debt crisis in Europe could have a Unilever is committed to maintaining its operations in all European
material adverse effect on Unilever’s business in a number of ways. countries.
Uncertainty, lack of confidence and any further deterioration in the We have conducted scenario planning in respect of a Eurozone
situation could lead to lower growth and even recession in Europe break-up, or of countries leaving the Eurozone, and this has been
and elsewhere. reviewed by the Boards.
Our operations would be affected if Eurozone countries were to We are taking measures designed to minimise the impact of the
leave the euro. In particular: potential scenarios whilst continuing to trade as normal, including:
• our European supply chain would face economic and operational • developing contingency plans in respect of our supply chain
challenges; operations;
• our customers and suppliers may be adversely affected, leading • exercising additional caution with our counterparty exposures;
to heightened counterparty credit risk; and • taking prudent balance sheet measures in relation to high risk
• our investment in the country concerned could be impaired and countries; and
may be subject to exchange controls and translation risks going • strengthening our short term liquidity positions.
forward.
The likely contraction in the availability of credit from financial
institutions and the impact this will have on Unilever’s liquidity risk
are described under ‘Financial’ below.
Unilever Annual Report and Accounts 2011
Report of the Directors About Unilever