Risk management
MANAGING RISKS AND UNCERTAINTIES
With our business growing and transforming every day, identifying, assessing and mitigating risks is one of our core priorities. Our business is governed by a robust risk management committee that helps us implement and monitor our progress on risk mitigation.
Risk management framework
Our risk management framework is developed in a manner that addresses our business needs while remaining simple and pragmatic. The framework consists of four key components:
1 RISK MANAGEMENT PROCESS
to identify, prioritise, and manage risks
2 RISK MANAGEMENT STRUCTURE
for implementation of the process
3 RISK MANAGEMENT TECHNOLOGY
to identify risks in a proactive manner
4 RISK MANAGEMENT SUBJECT MATTER EXPERTS
who engage with and guide business leadership to optimise the process
Risk management process
Risk Management Committee (RMC)
FORMED BY THE BOARD OF DIRECTORS
OBJECTIVE
Framing, implementing and monitoring a risk management plan
RMC'S RESPONSIBILITY
- Regularly reviewing the plan and ensuring its effectiveness
- Manages risks that impact midto long-term objectives of the business
Key risk categories and mitigation plans
CHANGING CONSUMER PREFERENCES
The pandemic has had a huge impact on consumer behaviour globally. Consumer preferences are changing and shifting towards branded, health and wellness focused products
Mitigation measures
- We track consumer trends, which act as inputs in our innovation process
- We have deployed a dedicated innovation funnel for the next five years, which encompasses evolving changes in consumer preferences
- During the year, we accelerated the pace of innovation across key categories with multiple launches/ extensions within key brands
- Implemented a well-defined NPD stage gate process and embedded the use of technology for tracking projects
COMMODITY SOURCING
Agri-commodities are subject to seasonal and market cyclicality. Volatility in commodity prices and availability can have an impact on our business, operations, and cash flows
Mitigation measures
- We rolled out restructuring of commodity sourcing organisation, which would act as a key enabler for future growth aspirations
- The commercial implications of commodity price movements are continuously assessed and, where appropriate, are reflected in the pricing of our products
- During the year, a network optimisation study was deployed to identify and evaluate alternate sources/vendors for various strategic tea components
BRAND EQUITY RISKS
The relevance of existing brands in light of changes in consumer behaviour is vital for sustainable growth of the organisation.
Mitigation measures
- For our tea brands, we executed state-specific strategies and continued to invest in localised marketing campaigns
- We significantly increased investment in brands in our India business
SALES AND DISTRIBUTION RISKS
We have ambitious distribution growth plans, and any strategic moves would have associated risks that need to be mitigated. The shift in channel/ retailer strategy also needs to be closely monitored.
Mitigation measures
- Expanded shopper marketing initiatives and leveraged portfolio play across Foods and Beverages
- 100% Distributor Management System (DMS) and Salesforce Automation (SFA) implementation to enable end-to-end visibility of secondary sales, distribution and servicing levels
- Implemented tailored trade strategies with an increased rigour to evaluate trade spend efficiencies, resulting in higher ROI on trade investments
- During the year, our 'Always on' performance marketing approach has yielded strong e-commerce growth
SUPPLY CHAIN RISKS
Lack of timely availability of resources can halt business operations and supply chain
Mitigation measures
- We have put in place business continuity plans for key comanufacturers and third parties
- In FY 21-22, partial lockdowns across the country and disruptions in finished goods supply chain were managed through enhanced crisis management and business continuity plans
CYBER SECURITY RISKS
Our IT infrastructure has been shifted completely to cloud for greater efficiency in our operations, thus exposing us to information security breaches through cyber attacks.
COVID-19 has given rise to further challenges in cyber-security
Mitigation measures
- While business applications and data are hosted on the cloud, our carefully designed architecture infrastructure is regularly benchmarked against NIST, CSA and other industry-leading standards
- Access to cloud infrastructure is designed on Cloud Scale Zero Trust Network architecture of industry leading provider
- Single-Sign-On solution is implemented for all applications with multi-factor-authentication for added security against identity/data theft
- During the year, we completed a security audit for our cloud infrastructure and implemented mitigation controls
- We scaled up proactive monitoring capabilities with Safe Security for the entire digital landscape, based on the industry standard of Common Vulnerability Scoring System (CVSS)
BUSINESS ACQUISITION AND INTEGRATION RISKS
Inorganic expansion will have associated risk of compliances, technology, business delivery, values and people/culture
Mitigation measures
- In our growth phase, managing integration risk has paramount importance. Management has constituted a Business Integration team comprising subject matter experts of different domains, to plan, prepare, track and monitor execution against predefined milestones and synergy benefits
- Compliance registers are maintained for various licenses, contracts, reporting, among others
- Employee engagement, role assignment, imparting training for inclusiveness and adoption of values and culture
COMPLIANCE AND REPUTATIONAL RISKS
Being part of the Tata Group, it is paramount for us to maintain the highest standards of doing business
Mitigation measures
- Being a multi-geography consumer major, we are subject to extensive laws and regulations, which are complex and constantly changing
- A compliance framework has been designed and rolled out, for different geographies/business units. In addition, audits are conducted by third parties and an in-house team from time to time
- A stringent code of conduct policy covering all our employees and business partners is in place to ensure adherence with regulations and to conduct business with the highest ethical standards
- All our manufacturing facilities undergo regular food safety, Good Manufacturing Practices, and safety audits along with continuous monitoring and upgradation
- During the year, 802 participants engaged with the anti-bribery and corruption e-learning module
- For vendor due diligence, anti-bribery and corruption questionnaire was shared with vendors and will be re‑administered every 2 years
SUSTAINABILITY RISKS
As a socially responsible company, it becomes imperative to reduce our environmental footprint and meet stakeholders’ expectations, particularly relating to climate change, water security, packaging waste, and sustainable agriculture
Mitigation measures
- Our sustainability strategy is centred on the pillars of 'Better Planet', 'Better Sourcing', 'Better Communities' and 'Better Nutrition'
- We have programmes to reduce energy consumption, increasing the use of renewable energy, circular economy and water stewardship
- Tea packing centres generated 47% higher solar energy, compared to FY 20-21
- Increased focus on sustainable sourcing- partnerships with trustea and Rainforest Alliance
- Financed climate change vulnerability and risk assessment studies in tea growing areas in India
- Tata Soulful products are based on millets, which are climate-resilient crops and they require lesser quantities of water and are high on nutritional value
- CSR & Sustainability Committee in place to assess and manage climate related risks
- During the year, Tata Coffee – Won 4 awards at OHHSAI HSE Excellence & Sustainability Awards 2021
PEOPLE RISK
To realise our vision, it is important to attract and retain talent
Mitigation measures
- Initiatives in place to build a progressive culture and engaged workforce, spanning employee well-being, diversity and inclusion, learning and development and career progression