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Business: Ethics, Governance & Risk
Answer
Introduction
Risk managements a crical function for companias, particle for thos listed on
the stock exchange thet operate in complex and dynamic environments. The board
‘of droctrs of alisod company is sponsible fr oversoving the company’s risk
management framework and ensuring tha itis effective in identifying and mieating
risks that may affect the company’s capacity to achieve its goals. This responsiblity
is based on the ethical pnciple of the company’s fiduciary duty to actin the hast
interests of ts stakeholders, Including shareholders, employees, customers,
‘Suppliers, and the wider communi. We wit use Hindustan Unilever Limited (UL),
‘one ofthe fop S00 companies ited onthe National Stock Exchange (NSE) by
market capitalization, as an example tollustate the Key inivatves taken by the
‘company to manage one financial sk and one non-francial skin the fiscal year
ani
Concept and Application
“The ethical principle that ques risk management is that itis on othe business to
recognise, valuala, and con the risks related to is actives. This rulo is based
fon the board of directors fiduciary responsibly to act in the organization's and its
stakeholders best nieve, induding sharehelders, staff members, clients, vendors,
land the general pubic For ousinesses, risk management is an essential task,
‘especialy for ited fms that oporato in complicated and dynamic contests. A litod
‘company's board of dirctors is in charge of reviewing the company's isk
management framework and making sure itis sucessful at detecting and managing
fick that might have an impact onthe company's capacity to fll its goals
‘Toillustate how a sted company’s board manages energies risk, we can take the
‘example of Hindustan Unievor Limited (HUL), one of the top 800 comparies listed
‘on the Natonal Stock Exchange (NSE) by market capitalization HULis a subsiiary
‘of Uniever, multinational eansumer goods company headquartered In London, UK
HUL's board of sirectors has estabished a rabust sk management framowork to
identify, assess, and manage risks associated wih is operalions. This frameworks
‘agnad with ine principles of os corparate governance and is designad 0 ensure
that the company operatos in a sustainable and sponsible manner.
Financial Risk Management Initiate:
‘One ofthe key financial risks that HUL faces i foreign exchange tek, given its
significant exposure to foreign currencies due tots interational operations. To
‘manage this risk, HUL has implemented a comprehensive hedging program that
includes the use of forward contracts an options to mfigate the impact of curency
fluctuations on is financial results.
Inits Annual Report for FY2021-22, HUL statas tha thas continued o implement
{his hedging program to manage is exposure to foreign curency sk. Specialy,
‘the company has hedged its foreign curroncy exposures up to 12 menths ahoad
using a combination of foward contracts and options. HUL's board af rectors has
reviewed and approved tis hedging program, which isimplementad by the
‘company’s treasury teem under the guidance ofthe Boar's rsk management
commitee
Nom Financial Risk Management Initiative
“Another ky risk that HUL fa00s is reputational isk. von its strong brand identity
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