Unilever 2012 Annual Report Download - page 42

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Unilever Annual Report and Accounts 2012 Report of the Directors About Unilever
ABOUT UNILEVER GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Descrpton of rsk What we are dong to manage the rsk
External economc and poltcal rsks,
and natural dsasters
Unilever operates across the globe and is exposed to a range of The breadth of Unilever’s portfolio and our geographic reach
external economic and political risks and natural disasters that may help to mitigate our exposure to any particular localised risk
affect the execution of our strategy or the running of our operations. to an extent. Our flexible business model allows us to adapt
our portfolio and respond quickly to develop new offerings
Adverse economic conditions may result in reduced consumer that suit consumers’ and customers’ changing needs during
demand for our products, and may affect one or more countries economic downturns.
within a region, or may extend globally.
We regularly update our forecast of business results and cash
Government actions such as fiscal stimulus, changes to taxation flows and, where necessary, rebalance investment priorities.
and price controls can impact on the growth and profitability
of our local operations. We have continuity planning designed to deal with crisis
management in the event of political and social events and
Social and political upheavals and natural disasters can disrupt natural disasters.
sales and operations.
We believe that many years of exposure to emerging markets
In 2012, more than half of Unilever’s turnover came from emerging has given us experience operating and developing our business
markets including Brazil, India, Indonesia, Turkey, South Africa, successfully during periods of economic, political or social change.
China, Mexico and Russia. These markets offer greater growth
opportunities but also expose Unilever to economic, political
and social volatility in these markets.
Eurozone rsk
Issues arising out of the debt crisis in Europe could have a material Unilever is committed to maintaining its operations in all
adverse effect on Unilever’s business in a number of ways. European countries.
Uncertainty, lack of confidence and any further deterioration We have conducted scenario planning in respect of a Eurozone
in the situation could lead to lower growth and further recession break-up, or of countries leaving the Eurozone, and this has been
in Europe and elsewhere. reviewed by the Boards.
Our operations would be affected if Eurozone countries were We are taking measures designed to minimise the impact of the
to leave the euro. In particular: potential scenarios whilst continuing to trade as normal, including:
• our European supply chain would face economic and • developing contingency plans in respect of our supply
operational challenges; chain operations;
• our customers and suppliers may be adversely affected, • exercising additional caution with our counterparty exposures;
leading 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 countries; and
and may be subject to exchange controls and translation • strengthening our short term liquidity positions.
risks going forward.
Fnancal
Unilever is exposed to a variety of external financial risks. Currency exposures are managed within prescribed limits and by
theuse of forward foreign exchange contracts. Further, operating
Changes to the relative value of currencies can fluctuate widely companies borrow in local currency except where inhibited by
andcould have a significant impact on business results. Further, local regulations, lack of local liquidity or local market conditions.
because Unilever consolidates its financial statements in euros it We also hedge some of our exposures through the use of foreign
issubject to exchange risks associated with the translation of the currency borrowing or forward exchange contracts.
underlying net assets and earnings of its foreign subsidiaries.
Our interest rate management approach aims to achieve an
We are also subject to the imposition of exchange controls optimal balance between fixed and floating rate interest exposures
by individual countries which could limit our ability to import on expected net debt.
materials paid in foreign currency or to remit dividends to the
parent company. We seek to manage our liquidity requirements by maintaining
accessto global debt markets through short-term and long-term
Currency rates, along with demand cycles, can also result in debt programmes. In addition, we have high committed credit
significant swings in the prices of the raw materials needed facilities for general corporate purposes.
to produce our goods.