Risk Management

At GCPL, we have a comprehensive and structured approach to risk management. Across our geographies, we have integrated our approach to risk management into the operating framework and reporting channels of our business. Starting with a Board-level oversight to a dedicated Risk Management Committee and a cross-functional team within the business, we routinely assess risks across the company and all geographies.

Executive Risk Management Committee The Executive Risk Management Committee (ERMC) ensures that we follow a structured risk management process. This committee is entrusted with the crucial task of risk identification, assessment, and mitigation for our company across various domains, including strategic, material, operational, transitional, technological, and environmental.

The ERMC shoulders the comprehensive responsibility of monitoring the company's risk landscape and managing it effectively to ensure a robust and thriving business. This committee remains steadfast in its commitment to uphold transparency and safeguard the interests of the company and its stakeholders.

Structure of the Executive Risk Management Committee

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Based on the recommendations of the Managing Director and CEO or the Chief Financial Officer, the ERMC may nominate or invite additional members/directors, as required, to participate in specific meetings.

The Secretary to the ERMC is the highest- ranking person with a dedicated risk management responsibility at operational and performance levels. The Secretary acts as a Chief Risk Officer and oversees the functioning of the risk management process. The Secretary must ensure that the ERMC meetings are held half-yearly or more frequently, if required.

Approach

We take a proactive approach to risk management, wherein an annual risk identification and assessment process is incorporated in line with our strategic business planning and annual business planning initiatives.

The annual business plan is a foundation for identifying and prioritising risks. Following prioritisation, a risk competency scan is conducted to determine existing management strategies that effectively address material and emerging risks to our business. This scanning process helps in pinpointing opportunities for enhancing risk mitigation.

For each material and emerging risk, the combined outcomes of the existing management strategies and identified improvement opportunities are documented in a formal risk management plan. Subsequently, the assessment of prioritised risks and their mitigation strategies is presented to the Board Risk Management Committee for evaluation and review.

The risk assessment function is structurally independent of business and is overseen and coordinated by the Secretary to the ERMC. The risk assessment outcomes fall under the ownership of the respective business function heads. This collaborative approach ensures a comprehensive and efficient risk management strategy across the organisation.

Risk management approach

IDENTIFY

PRIORITISE

MITIGATE

MONITOR

Collate a laundry

Prioritise basis risk score

Prepare mitigation plans,

Monitor and share periodic

list of risks

(probability and severity),

assign responsibilities,

updates with the Risk

consider inherent risks

consider residual risks

Management Committee

Risk inventory

Material and

Mitigation

Monitoring and

emerging risks

plans and KPIs

adding new risks

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Risk review

Risk owners are appointed for material and emerging risks. These risk owners assess, manage, evaluate, and monitor the risks and propose the risk mitigation plan. The implementation of the risk mitigation action plan is agreed upon by the ERMC and Board Committees, and any deviations are discussed with the function heads and Managing Director and CEO.

The risk owners may change over time, depending on their changing roles and

The ERMC is responsible for:

  • Half-yearlyreports to the Audit Committee and Risk Management Committee
  • Half-yearlyreview of the risk mitigation status for material and emerging risks
  • Annual assessment of risks in line with business/strategic planning

New managers are inducted on Enterprise Risk Management training, which is organised quarterly. They are trained on inputs on risk definition, identification, rating, classification, prioritisation, mitigation, control, and review. Across all manufacturing facilities, we also conduct workshops on occupational health and safety risks and management throughout the year, encompassing over 100% of our manufacturing plant workforce.

responsibilities within the organisation.

On a half-yearly basis, the risk owner formally reports about risk management within their area of operation at the ERMC meetings. This reporting is aimed at assessing how well material risks are being managed and if any additional risk has emerged that can adversely affect business operations. The risk report includes:

  • Performance of the function in managing its material risks, considering the mitigation strategies
  • Identification of any additional emerging risks
  • Definitions of the mitigation strategy for the new material risks

The results of this report are coordinated by the Secretary to the ERMC and are made available for review by the ERMC. The Secretary submits a half-yearly report on risk management for review and appraisal of the ERMC. In addition, every 6 months, based on a pre-specified calendar, a risk owner would formally present the risk management initiatives and status of their area of operation to the ERMC

Risk culture

Employees across all levels and geographies have risks as part of their individual goals and performance review. These risks range from measures to reduce occupational health and safety incidents, adherence to regulations and compliance, financial forecasting to reduction of volatile forex exposure. The risk goal weightage for employees ranges from 30% to 60% and is a part of their half-yearly HR employee performance review. Compliance and quality risk assessments are a part of our new product development (NPD) process, and the goal is aligned with the key performance indicators of R&D team members involved in NPDs.

Our employees are encouraged to share feedback for continuous improvement in risk management practices. A formal annual NPS survey is conducted across the company for all functions. Risk management is a part of that survey, and the feedback helps us improve our processes and systems.

An annual InTune survey is also conducted across the company seeking suggestions and feedback from all employees. Moreover, emerging risks and development of mitigation measures are discussed in regularly conducted departmental monthly review meetings. The line manager records valid risks identified by team members and communicates them to the Risk Management Committee for further action. At the plant level, we have a mobile app to identify occupational health and safety risks. These risks are tracked, reviewed, and mitigated through the app.

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Risk management

Risk category

Risks description

FinancialForex

Unfavourable fluctuations in the currency and/or open exposures could put pressure on the cash flow and margins.

Risk mitigation

Priority

At GCPL, the forex policy is determined

by a dedicated Forex Committee. This

committee monitors all exposures and

High

guides decisions on open exposures and

hedging. The committee meets monthly

and provides quarterly reports to the

Board on forex exposures.

Supply chain

Commodity price volatility

Our supply chain faces the challenges of

unexpected and cyclic fluctuations in input

costs and commodity pricing pressures,

specifically concerning commodities such

as palm and crude oil. The recent Russia-

Ukraine conflict has had a significant impact

on global oil and natural gas trading and

transportation, further exacerbating the

situation.

Our primary commitment remains to serve

the needs of our consumers above all else.

In challenging times, we continue to work

High

in their best interest and have passed on

only a fraction of the increased input costs

to them. Additionally, we have consistently

maintained the quality standards of our

products, refusing to compromise on

quality in the face of rising input costs.

To further mitigate this risk, we are actively

working to secure high-quality palm oil

from various regions and geographies,

thereby reducing our dependency on

major palm oil markets.

Operational

Occupational health and safety

Physical risk to the workforce in

manufacturing operations and frontline

distribution teams; risk of appropriate

handling, training, and safely disposing of

waste; risks of unrest due to incidents in

both the workforce and local communities

that they are from.

This is a high-priority area for us. We have

a dedicated Human Rights Policy, strong

standard operating procedures to ensure

High

the highest adherence to health and

safety, and a governance mechanism to

ensure any incidents are duly investigated

and resolved for the future. We ensure

a periodic review of safety procedures,

and the Central Safety Committee and

committees at plants review monthly data

for occupational health and safety.

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Risks category

Risks description

Economic

Hyperinflation and

currency devaluation

Hyperinflationary pressures pose significant

challenges, disproportionately affecting

those with limited financial means. The

instability of local currencies in regions

where we operate results in an increasing

number of vulnerable individuals being

priced out of access to necessities.

Risk mitigation

We are strategically utilising our manufacturing capabilities and human resources in regions experiencing hyperinflation to lower our production costs. Simultaneously, we are investing in local procurement initiatives to reduce reliance on imports and minimise the impact of global supply chain disruptions. By supporting the local economy, we aim to foster economic stability and contribute to the well-being of the communities we serve.

Priority

Medium

Financial

Changing consumer preferences

The move towards natural and sustainable

options with an emphasis on the entire

value chain being sustainable.

We have conducted Life Cycle Assessment

of more than 50% of our products (with

a plan to cover 80% by 2025) to assess

Medium

where in the value chain can our products

be more sustainable on all environmental

fronts: energy, water, plastic, and

waste. We are working on the findings

of the reports to make our products

demonstrably greener.

A great example of our green product

is our innovative powder-to-liquid

Magic handwash. It is the world's most

affordable handwash. It uses half the

plastic packaging compared to a regular

handwash refill and only a quarter of

the fuel to be transported. We are also

working, finding, and testing alternate

packaging materials and increasing the use

of post-consumer recycled plastic to move

away from virgin plastic.

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Godrej Consumer Products Limited published this content on 14 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 July 2023 13:12:09 UTC.