Unilever 2015 Annual Report Download - page 44

PRINIPAL RISK DESRIPTION OF RISK
BUSINESS
TRANSFORMATION
Successful executon of busness
transformaton proects s key to
delverng ther ntended busness
benefts and avodng dsrupton to
other busness actvtes
Unlever s contnually engaged n maor change proects, ncludng acqustons and dsposals
and outsourcng, to drve contnuous mprovement n our busness and to strengthen our portfolo
and capabltes
Falure to execute such transactons or change proects successfully, or performance ssues wth
thrd party outsourced provders on whch we are dependent, could result n under-delvery of the
expected benefts Furthermore, dsrupton may be caused n other parts of the busness
EXTERNAL EONOMI AND
POLITIAL RISKS AND
NATURAL DISASTERS
Unlever operates around the
globe and s exposed to a range of
external economc and poltcal
rsks and natural dsasters that
may affect the executon of our
strategy or the runnng of our
operatons
Adverse economc condtons may result n reduced consumer demand for our products, and may
affect one or more countres wthn a regon, or may extend globally
overnment actons such as fscal stmulus and prce controls can mpact on the growth and
proftablty of our local operatons
Socal and poltcal upheavals and natural dsasters can dsrupt sales and operatons
In 2015, more than half of Unlever’s turnover came from emergng markets ncludng Brazl,
Inda, Indonesa, Turkey, South Afrca, hna, Mexco and Russa These markets offer greater
growth opportuntes but also expose Unlever to related economc, poltcal and socal volatlty
TREASURY AND PENSIONS
Unlever s exposed to a varety of
external fnancal rsks n relaton
to Treasury and Pensons
The relatve values of currences can fluctuate wdely and could have a sgnfcant mpact on
busness results Further, because Unlever consoldates ts fnancal statements n euros t s
subect to exchange rsks assocated wth the translaton of the underlyng net assets and earnngs
of ts foregn subsdares
We are also subect to the mposton of exchange controls by ndvdual countres whch could lmt
our ablty to mport materals pad n foregn currency or to remt dvdends to the parent company
urrency rates, along wth demand cycles, can also result n sgnfcant swngs n the prces of the
raw materals needed to produce our goods
Unlever may face lqudty rsk, e dffculty n meetng ts oblgatons, assocated wth ts fnancal
labltes A materal and sustaned shortfall n our cash flow could undermne Unlever’s credt
ratng, mpar nvestor confdence and also restrct Unlever’s ablty to rase funds
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
ertan busnesses have defned beneft penson plans, most now closed to new employees, whch are
exposed to movements n nterest rates, fluctuatng values of underlyng nvestments and ncreased
lfe expectancy hanges n any or all of these nputs could potentally ncrease the cost to Unlever of
fundng the schemes and therefore have an adverse mpact on proftablty and cash flow
ETHIAL
Actng n an ethcal manner,
consstent wth the expectatons
of customers, consumers and
other stakeholders, s essental
for the protecton of the reputaton
of Unlever and ts brands
Unlever’s brands and reputaton are valuable assets and the way n whch we operate, contrbute to
socety and engage wth the world around us s always under scrutny both nternally and externally
Despte the commtment of Unlever to ethcal busness and the steps we take to adhere to ths
commtment, there remans a rsk that actvtes or events cause us to fall short of our desred
standard, resultng n damage to Unlever’s corporate reputaton and busness results
LEAL AND REULATORY
omplance wth laws and
regulatons s an essental part
of Unlever’s busness operatons
Unlever s subect to natonal and regonal laws and regulatons n such dverse areas as product
safety, product clams, trademarks, copyrght, patents, competton, employee health and safety,
the envronment, corporate governance, lstng and dsclosure, employment and taxes
Falure to comply wth laws and regulatons could expose Unlever to cvl and/or crmnal actons
leadng to damages, fnes and crmnal sanctons aganst us and/or our employees wth possble
consequences for our corporate reputaton
hanges to laws and regulatons could have a materal mpact on the cost of dong busness Tax, n
partcular, s a complex area where laws and ther nterpretaton are changng regularly, leadng to
the rsk of unexpected tax exposures Internatonal tax reform remans a key focus of attenton wth
the OED’s Base Eroson & Proft Shftng proect and the EU’s acton plan for far and effcent
corporaton taxaton
41Unilever Annual Report and Accounts 2015 Strategic Report