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36 Unilever Annual Report and Accounts 2012Report of the Directors About Unilever
RISKS
Outlook and rsks 2013
Outlook and rsks 2013
The following discussion of the risk outlook and our principal risk management activities includes ‘forward-looking’ statements
that reflect Unilever’s view of the operating risk environment. The actual results could differ materially from those projected.
See the ‘Cautionary statement’ on the inside back cover.
Outlook
Market conditions for our business were challenging in 2012 and we do not anticipate this changing significantly in 2013.
Economic pressures are expected to continue. We expect consumer markets to remain flat to slightly down in developed markets.
In emerging markets consumer demand remains robust but there is nonetheless the risk of modest slowdown in key markets such
as China, India and Brazil. Currency markets remain volatile and uncertain. Although we have seen rather more stable conditions
in key commodity markets in 2012 we remain watchful for further periods of volatility in 2013. A worsening economic scenario could
be triggered by a major Eurozone crisis prompted by countries leaving the euro or by a break-up of the euro leading to significant
contraction in financial markets, followed by a severe recession in Europe and knock-on effects globally. Terrorist activity and political
unrest may also result in business interruptions and a decreased demand for our products.
The competitive environment for our business is likely to remain intense in 2013. Our competitors, both global and local, will continue
to shift resources into emerging markets. We expect continued high levels of competitive challenge to our many category leadership
positions. Some of this may be price based, but we also expect strong innovation based competition. With the improvements we have
been making to our business we are well prepared for these challenges.
In a period of significant uncertainty and downside risk, we believe Unilever’s operational and financial flexibility, and speed of response
to a fast changing environment are vital assets. We will continue to focus on our long term strategic priority of driving volume growth
ahead of our markets whilst providing a steady improvement in core operating margin and strong cash flow. We are well placed in
emerging markets and we expect these markets to continue to drive growth. Our portfolio strategy defines the role of our categories
and our 2013 outlook fully reflects the choices made. This gives us confidence that Unilever is fit to win, whatever the circumstances.
Prncpal rsk factors
Our business is subject to risks and uncertainties. The risks that we regard as the most relevant to our business are identified below. We have
also commented on certain mitigating actions that we believe help us to manage these risks. However, we may not be successful in deploying
some or all of these mitigating actions. If the circumstances in these risks occur or are not successfully mitigated, our cashflow, operating
results, financial position, business and reputation could be materially adversely affected. In addition risks and uncertainties could cause
actual results to vary from those described below, which may include forward-looking statements, or could impact on our ability to meet
our targets or be detrimental to our profitability or reputation.
Descrpton of rsk What we are dong to manage the rsk
onsumer Preference
As a branded goods business, Unilever’s success depends on
the value and relevance of our brands and products to consumers
across the world and on our ability to innovate.
Consumer tastes, preferences and behaviours are constantly
changing and Unilever’s ability to respond to these changes and
to continue to differentiate our brands and products is vital to
our business.
We are dependent on creating innovative products that continue
to meet the needs of our consumers. If we are unable to innovate
effectively, Unilever’s sales or margins could be materially
adversely affected.
We continuously monitor external market trends and collate
consumer, customer and shopper insight in order to develop
category and brand strategies.
Our Research and Development function actively searches for
ways in which to translate the trends in consumer preference and
taste into new technologies for incorporation into future products.
Our innovation management process deploys the necessary
tools, technologies and resources to convert category strategies
into projects and category plans, develop products and relevant
brand communication and successfully roll out new products
to our consumers.