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CASE STUDY 3: ALGIDA Risk Management Each organization must cope with different types of risks, among others

financial, technological, related to the health and safety of work or the risk of losing reputation. At UnileverWorld attention is paid to identify and manage risk so as not to disappoint customers, employees and other stakeholders expectations. There are four main strategies in risk management: A. Avoidance taking action in order to remove factors being the cause of risk. The extreme form of avoidance of risk is the termination of operations (for example withdrawal from the market, termination of cooperation with a given chain, termination of production of a given product), which occurs when the level of risk and its possible consequences are high and it is impossible to deal with the risk otherwise. B. Reduction although causes of the risk cannot be entirely removed, the level of risk or its consequences can be reduced to an acceptable degree. An example of such strategy can be the introduction of procedures aiming at reducing the risk of occurrence of undesirable situations or preventive actions which will make negative consequences of undesirable situations more bearable. C. Transference transferring the risk to a third party by acquiring an insurance policy or outsourcing services. D. Acceptance accepting the risk under the condition that the probability that an undesirable event will occur is small or even if it occurs, its negative consequences will be bearable. In some cases the acceptance of risk is indispensable as it is very difficult, expensive or even impossible to deal with it otherwise.

Your task You are a member of the Algida team. Ice creams belong to a category of special products, which unlike many others, can be sold only during a limited period and the majority of sales is accomplished in summer. Before a new season begins your team is analyzing successes and failures of the previous season and you are trying to identify and assess risks that may appear in the time to come. You have managed to identify several risks and their management has been distributed among members of the team. You are responsible for the following areas: 1 Weather sales are closely related to the weather. If summer is hot and sunny, you sell more ice creams; if the weather is bad, sales drop considerably. A cold and rainy summer will have a bad effect on the sales figures. Competitor launching new product Algida is the market leader when it comes to ice creams as products of other brands are less popular among customers. Algidas most important competitor has decided to launch new products basing on Algidas most successful ones. It is not an innovative product and therefore there is almost no possibility that it will encourage people who did not buy ice creams to start doing it and the value of the category will not increase significantly. You also know that people are keen to buy novelties and that is why there is a risk that competitors new products will have a negative influence on your companys share of the market. Salmonella ice cream basic ingredients make it susceptible to Salmonella. In the previous season bacteria were found in one of your competitors products, which had a very bad influence on their reputation and sales. That is why all ice cream producers, bearing in mind their customers health and satisfaction, should manage this risk very attentively.

Materials delivery to the factory so far Unilever has taken care on its own of the delivery of materials from the producer to the factory. As the ice cream season is quite short any delay in the production phase leads to further delays in distribution channels and consequently reduce benefits. Unfortunately, the logistics process has turned out to be inefficient - in spite of attempts to optimize the process timeliness of deliveries has not improved. As Unilever is a trade company development of logistic functions is not one of the priorities. Milk quality the freshness and high quality of products is very important in the production process of ice creams. Coli bacteria have been found in the milk provided by one of your main suppliers. According to the contract the cooperation with the supplier can be terminated in such situation without any financial charges for Unilever. However, the producer has promised to solve the problem in 3 weeks, which wouldnt affect the production and availability of ice creams in shops. On the other hand, Unilever has the possibility to obtain milk from other sources.

For each of the 5 risks described above choose the most suitable risk management strategy by associating the appropriate letter: A (for avoidance), B (for reduction), C (for transference) or D (for acceptance). Mark your answers in a sequence of 5 letters, each letter being associated to the risk (for instance ACADB). Score: 5 correct answers 5 points 3-4 correct answers - 3 points 0-2 correct answers 0 points