Achieving the financial goals of a company is never easy at all. It is threatened by certain factors that are generally termed risk factors. Risk factors are therefore defined as any exposure that lowers the profit or leads to the downfall of a company. It can also be defined as the return characteristics that are used to determine the return profile of an organization’s asset class. This paper examines Procter and Gamble’s risk factors. It indicates which risks are operational or strategic in a table format as stated in the company’s 2021 Annual Report. The paper then concludes with the organization’s risk management focus based on the table. Even though the company should focus on operational and strategic risk factors, much priority should be given to strategic risk factors since they have severe consequences that can affect the business in the long term.
| Operational Risk Factors | Strategic Risk Factors |
| 1. Macro and Political – Economy and political environment, natural and human disruptions, international operations, and capital markets.
2. Legal and Regulatory – Litigation and legal liabilities, regulations, environmental and government incentives, and taxation. 3. Production – cost, supply chain, manufacturing, and human capital. |
4. Financial and Corporate – Accounting and financial operations, debt and financing, and corporate activity and growth.
5. Ability to Sell – Demand, competition, sales and marketing, and brand and reputation. 6. Technology and innovation –technology, cyber security, trade secrets, and patents. |
Operational risk factors affect the company’s ability to execute its strategic plans. They are the losses caused by policies, failed processes, and events that disrupt business operations. On the other hand, strategic risk factors significantly affect the company’s business strategy and objectives (Valsamakis et al., 69). They ultimately impact the shareholders’ value and, therefore, the ongoing validity of the company. These risks have severe consequences affecting the business in the long term. Since strategic risk factors have long-term implications in the industry, much management should prioritize them to ensure that the Procter and Gamble company achieves its business strategies and objectives.
The company should develop specific management plans on financial and corporate risks to ensure that these risks are as limited as possible. These risks are related to financial investments, interests, debts, and funding. They are also associated with the value of the intangible assets, accounting loss, financial statements, the company’s profitability, and fluctuating results (Spector and MacGregor, 36). They directly impact the company’s financial position and operations; failing to manage them can lead to its downfall. Any company’s operations are based on its economic capabilities, including the ability to fund its projects. Failure to manage finances marks the beginning of decline; therefore, before any other consideration, they should be prioritized first.
Apart from the financial and corporate risks, the focus should also be on managing technology and innovation risks and the company’s selling ability. The technology and innovation factors comprise the risks associated with the company’s reliance, innovation, and product development. On the other hand, the ability to sell factors include the demand for the company’s goods and services, sales, distribution channels and marketing, and the risks related to the company’s brand and reputation (Spector and MacGregor, 41). Managing risks related to technology and innovation enables the company to eliminate the risks associated with selling. This is because technology increases production.
In conclusion, much priority should be given to the strategic risk factors since they have severe consequences that can affect the business in the long term, even though the company should focus on operational and strategic risk factors. Managing the strategic risk factors should start with the financial factors, technological and innovative factors. Finally, the focus should be on the factors affecting the company’s selling ability.
Works Cited
Spector, Tim D., and Alex J. MacGregor. “Risk Factors for Osteoarthritis: Genetics11Supported by Procter & Gamble Pharmaceuticals, Mason, OH.” Osteoarthritis and Cartilage, vol. 12, 2004, pp. 39–44, https://doi.org/10.1016/j.joca.2003.09.005.
Valsamakis, Anthony C., et al. Risk Management. Heinemann, 2010, pp. 61-96.
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