Emerging Risks
There are some risks that we are not yet aware of, or about which there is a great deal of uncertainty. There may be some indicators that suggest changes are occurring and we may be able to identify what impact those changes may have.
Even risks that we know about may have unforeseen consequences. A good example is Covid-19. While pandemics have been on the risk register and included in the business continuity program of many large companies for at least 20 years, no-one thought that a pandemic would have the global impact that Covid-19 has had.
While identifying, assessing and mitigating the risks we know about as best we can remains critical for our business, we also recognize that we must continually review our environment and identify risks that may impact us in the future.
Emerging risks are those that may have an impact on us in the future or over time but may not be having an impact on us now. To the extent we can identify, evaluate and prepare our business for these risks, the better we are able to prevent them from having a significant impact on us. We may even be able to turn them into an opportunity if we identify them early enough and develop action plans to take advantage of them.
CCHBC has incorporated the consideration of emerging risks into our established ERM process. We have done this by:
- Encouraging all business units to include a discussion on emerging risks in their monthly management reviews. This is supported by regular involvement of the Group CRO in BU management meetings. The outcome of these discussions are included in the Regional Reviews with the Region Directors and their teams, and with the COO.
- Including discussion on emerging risks into the Group CRO risk reviews with the Group Functions.
- The creation of an emerging risk register to complement our strategic risk register
- The outcome of these discussions is the identification of 3 emerging risks for discussion in our Group Risk and Compliance Committee meetings. The possible outcomes of these discussions include:
- creation of a project team to conduct a deeper assessment,
- identification of signals and agreement on monitoring for changes associated with the risk,
- inclusion in our strategic risk register
- Addition of emerging risk discussion in Group CRO’s reports to the Executive Leadership Team and the Audit & Risk Committee of the Board
In 2020, we identified the following key emerging risks:
E‐commerce
COVID-19 has accelerated the acceptance and popularity of e-commerce and the development of new technologies that support that growth. For example, 70% of online shoppers in the 2nd and 3rd quarter of 2020 were new to online shopping. We expect that growth to continue well after the current COVID-19 influenced environment.
Our products are available on many e-commerce platforms. However, e-commerce is changing the path to purchase from traditional retailers – where we have well established relationships and highly developed capabilities in route to market, to online retailers.
Through the use of technology and access to consumer data, online platforms have significant capability to build direct relationships with consumers and influence their purchasing decisions.
E-commerce provides significant opportunities for our business in both enhancing our B2B services as well as direct to consumer. It also creates new risks. Technology and business models supporting e-commerce are relatively new and changing rapidly. We expect some degree of obsolescence and potential failures as e-commerce continues to evolve.
Although sales of our products over online platforms are relatively small, it is growing fast. If we fail to take advantage of engaging with consumers online, we may not meet our growth targets and leave ourselves at a competitive disadvantage.
In 2020 we developed and evolved a range of digital solutions for customer service such as our Hybris platform and ePartnershop, an exclusive selling platform providing home delivery for our wholesaler customers. We also grew our direct-to-consumer platform in Switzerland – Qwell, offering a web-based ordering system.
Changes in technology
Changes in technology are contributing to disruption in many industries. Traditional barriers to entry that have provided our business with a competitive advantage – such as investment in research and development, manufacturing scale and capability, distribution networks, marketing capabilities, access to finance and retailer relationships – are still critical to our business but are increasingly less of a barrier to new, smaller entrants and existing competitors.
This reduction in traditional barriers to entry means that more small manufacturers, niche products and private label products continue to appear on retailer shelves or offered over online platforms as they can increasingly compete successfully against large established manufacturers.
Small, niche brands and private label products while still individually small, have collectively captured a significant amount of growth in many food and beverage categories, outstripping the growth of large manufacturers in many areas. Over time if this growth continues in product lines that we choose to offer, it could impact our sales and we may not meet our growth targets.
We mitigate these changes in technology by continually assessing and investing in new technologies to leverage the strength of our portfolio, enhance the capabilities of our people, improve the efficiency of our manufacturing and distribution and innovate in all aspects of our business.
In collaboration with The Coca-Cola Company and other key partners, we are enhancing our ability to understand what consumers want and how and where they wish to consume our products so that we continue to deliver high-quality beverages that consumers love.
Supply chain integrity
Consumers, investors and other stakeholders are increasingly interested in knowing the origin and sustainability of our products and all ingredients used in them. Natural resource management is critical for the environment and the long-term sustainability of our business. The growing expectation of transparency leads to greater scrutiny of the integrity of our entire value chain.
Our Company has a well-established supply chain management system and robust set of Supplier Guiding Principles that all suppliers are expected to comply with to meet our high-quality standards and our expectations for the ways they operate. This includes adherence to stringent human rights and sustainable agricultural practices. As we deepen the assessment of our supply chain practices, we may uncover practices that need to change either gradually or at a faster pace. Such changes may generate costs to our business as well as generate reputation risks.
To assess and monitor changes in transparency expectations, we support and participate in a number of reporting frameworks. We will include additional consideration of this key area in our assessment of strategic risks in the first half of 2021.
Changes to working arrangements
Like many companies, CCHBC has been exploring options for providing our people with more flexible working arrangements and opportunities for enhancing work-life balance.
With the onset of the Covid-19 pandemic however, many of our people have been forced to work from home. This has led to many of our people having to make significant adjustments to their work and family lives in a very short time.
As we emerge from Covid related restrictions, some of these changes are likely to remain in place with many of our people reporting positive experiences and wanting to continue to work from home, at least in part.
We are also aware of some of the negative aspects of working from home such as feelings of isolation and difficulties with appropriate working conditions. This raises mental health issues for our people as well as potential productivity issues.
The company has and will continue to provide additional support to our staff on mental health through our Employee Assistance Program (EAP).
The company is working on plans for gradual introduction of longer-term changes to working arrangements post-pandemic that will include support for safe, productive working arrangements.
