D) TYPE OF RISK FACED BY NESTLE COMPANY

Risk is a situation involving exposure to danger and it is an uncertainty. All type of company
has different types of risk that they being exposed. For the Nestle Company they also have
their own risk when operate their business. Here are several risk that had been facing by
Nestle Company.

First and foremost, Nestle Company has facing a risk which is the geography risk. It is when
the climate has change, the company has to confront with unpredicted risk related to the
supplies of agriculture raw material where the company need to bear the problem of
water shortages and pollution. This risk affect Nestle Company because Nestle company is
one of the business that produce product by using agriculture raw material which agriculture
consumes for about 70% of fresh water. When there happen distruption in freshwater it will
lead to the company difficult to produce its product. This company overcome all this risk by
using a good strategies which is this company has been running a supply chain
management programme, which includes auditing thousands of suppliers in all kinds of
product categories. They choose the best supplier of product to make sure that the quality of
raw material is high quality especially for the dairy, coffee and cocoa because the demand is
booming. If the supplier not fulfil all the requirement as a supplier, Nestle Company will stop
doing business with them and find the other one supplier.

Secondly, risk faced by Nestle Company is economy risk. Economic risk is happen due to
changes in macroeconomic conditions likes prices, exchange rates, government regulation,
or political stability will affect an investment, usually one in a foreign country. For example
like what happen in Nestle Company. It is Multinational Company from Switzerland that
operated in Malaysia. In Malaysia there has an economic problem where the value of the
Ringgit is cheaper than the other and it also lead to increase in level of prices. Due to that, it
will affect Nestle Company because when most of the product has increase in price level
customers will find another substitute goods that offer low price. Thus, it will lead to low
demanding of Nestle product. In order to prevent this happen, Nestlé (Malaysia) Chief
Executive Officer,has decided to maintain all the prices and they also do not have intention
to increase the price of the product because he assume that even though consumer
confidence towards this product is weak , but he confident that it will recover soon. The
chairman also said that, despite facing the challenging 2016, Nestle (Malaysia) posted a
strong performance in the first quarter ended 31 March 2017 with revenue increasing 4.4 per
cent to RM1.4 billion compared to RM1.3 billion recorded in the same period last year. The
Chief Executive also said that, when most of goods and services in Malaysia has increase in
price, the consumer maybe will less eat in restaurant but they will eat maggi so it will lead to
increase in the sales of maggi. Furthermore, as example, consumers have a certain amount
of money but do not buy a car and to be happy in such an economic situation they may
choose ice cream that been produce by Nestle Company so it also will generate sales for
that company.