劍橋風險研究中心-消費部門的風險管理（英）

CambridgeCentreforRiskStudies

CambridgeCaseStudySeries

RISKMANAGEMENTFORTHECONSUMERSECTORS

centrefor

Riskstudies

UNIVERSITYOF

CAMBRIDGE

JudgeBusinessschol

Developingriskprofessionals

Acknowledgements

CambridgeCentreforRiskStudiesgratefullyacknowledges

theInstituteofRiskManagementforsupportingthe

researcheffortssummarisedinthisreport.Wealso

gratefullyacknowledgethesupportreceivedforthistrackof

researchfromAIG,Citi,Lloyd’s,andWillisTowersWatson.

TheCentreisgratefulfortheexpertiseprovidedbyour

researchteam,collaborators,andsubjectmatterspecialists.

Anymisinterpretationinuseoftheadviceprovidedis

entirelytheresponsibilityoftheCambridgeCentreforRisk

Studies.

PaperCitation:

CambridgeCentreforRiskStudies,2019.RiskManagement

fortheConsumerSectors.CambridgeCentreforRisk

StudiesattheUniversityofCambridgeJudgeBusiness

School,incollaborationwithInstituteofRiskManagement.

or

Tuveson,M;Ralph,D;Carpenter,O;Copic,J;Deng,K.,

Coburn,A.W.,2019.RiskManagementfortheConsumer

Sectors.CambridgeCentreforRiskStudiesattheUniversity

ofCambridgeJudgeBusinessSchool,incollaborationwith

InstituteofRiskManagement.

CambridgeCentreforRiskStudies

ResearchTeam

DrMichelleTuveson,Chairman&ExecutiveDirector

ProfessorDanielRalph,AcademicDirector

DrAndrewCoburn,ChiefScientist

SimonRuffle,DirectorofResearchandInnovation

JenniferCopic,ProjectManagerandLiabilityResearchLeadDrAndySkelton,LeadModeller

KenDeng,LeadFinancialRiskResearch

OliverCarpenter,LeadEnvironmentalRiskResearch

DrJenniferDaffron,LeadTechnologyRiskResearch

TamaraEvan,LeadGeopoliticalRiskResearch

JamesBourdeau,GeopoliticalRiskResearch

PhilCameron,CyberRiskResearch

TimothyDouglas,RiskModeller

TimothySummers,SeniorDataScientist

WilliamTurner,DataScientist

DrPaulBurgess,SeniorAdvisorforRiskManagementJayneTooke,CommunicationsAssistant

Consultantforfloodscenarioanalysis:JamesPollard

CambridgeCentreforRiskStudies

UniversityofCambridgeJudgeBusinessSchool

TrumpingtonStreet

CambridgeCB21AGUnitedKingdom

enquiries.risk@jbs.cam.ac.uk

WebsiteandResearchPlatform

www.jbs.cam.ac.uk/faculty-research/centres/risk

InstituteofRiskManagement

SackvilleHouse

143-149FenchurchStreet

London

EC3M6BN

UnitedKingdom

Website

TheviewscontainedinthisreportareentirelythoseoftheresearchteamoftheCambridgeCentreforRiskStudies,anddonotimplyanyendorsementoftheseviewsbytheorganisationssupportingtheresearch,orourconsultantsandcollaborators.TheresultsoftheCambridgeCentreforRiskStudiesresearchpresentedinthisreportareforinformationpurposesonly.Thisreportisnotintendedtoprovideasufficientbasisonwhichtomakeaninvestmentdecision.TheCentreisnotliableforanylossordamagearisingfromitsuse.AnycommercialusewillrequirealicenseagreementwiththeCambridgeCentreforRiskStudies.

Copyright?2019byCambridgeCentreforRiskStudies.

RiskManagementfortheConsumerSectors2CambridgeCaseStudySeries

Contents

AbouttheIntstituteofRiskManagement(IRM)

4

ForewordfromtheIRM

5

ExecutiveSummary

6

Section1:Introduction

8

AFictionalisedCompanyasaUseCase

9

CompanieswithintheConsumerSectors

9

Section2:TheBusinessEnvironmentforConsumerSectorCompanies

10

BusinessModels

10

ProfitMarginsofConsumerSectorCompanies

12

SupplyChains

12

RisksoftheDigitalEconomy

14

ChangingConsumerPreferences

15

CorporateDistress

15

Section3:RisksforConsumerSectorCompanies

16

Self-ReportedTopEnterpriseRisksbyCompaniesintheConsumerSectors

16

ConstructingaComprehensiveRiskRegister

18

CambridgeTaxonomyofBusinessRisks

18

Section4:ExplorationofRisksthroughScenarios

20

IntroductiontoScenarioStressTests

20

ScenarioStressTeststoAssessRiskExposureandtheValueofMitigations

21

Section5:ApplicationofScenariosforCorporateRiskProfiling

23

DefiningaCorporateLossModel

23

CorporateLossModellingMethodology

23

FiveYearEnterpriseValueatRisk(5yrEV@Risk)

23

Using5yrEV@RiskinDecision-Making

23

Section6:OverviewofaFictionalisedCompany–Avocadoplc

24

Description

24

ValueChain

24

FinancialPerformance

25

MaterialityofRisks

27

EvaluatingtheMaterialityofRisks

27

Section7:StressTestScenarios

28

OverviewandSelectionofScenarios

28

ScenarioA-TradeDispute:UnitedStatesvsEuropeanUnion

28

ScenarioB-GeopoliticalConflict:PakistanvsIndia

28

ScenarioC-CyberAttack:ContagiousMalwareInfestation

28

ScenarioD-NaturalCatastrophe:FloodsDamageKeyFacility

29

ScenarioE-Pandemic:HighlyInfectiousInfluenzaVirus

29

ScenarioF-Governance:EqualPayMovement

29

Section8:DevelopingScenariosandAnalysingtheirImpacts

30

LikelihoodofScenarioOccurrence

30

ScenarioImpactAssessment

30

CambridgeCaseStudySeries3RiskManagementfortheConsumerSectors

Contents

Section9:InformingRiskDecisions

33

TheCompany’sRiskMatrix

33

BreachingExplicitRiskToleranceLevels

34

DefiningtheCompany’sRiskTolerance

34

LikelihoodofCrisis

35

CompanyLossExceedanceProbability

36

Section10:RiskMitigationActions

37

Threat-specificMitigationforCatastrophicRisks

37

Threat-specificMitigationforStrategicRisks

37

Resilience-strengthening

37

MonitoringOtherRisks

38

Section11:Conclusions

39

Bibliography

40

AppendixA:ScienceinScenarios

42

ScenarioA-TradeDispute:UnitedStatesvsEuropeanUnion

42

ScenarioB-GeopoliticalConflict:PakistanvsIndia

43

ScenarioC-CyberAttack:ContagiousMalwareInfestation

44

ScenarioD-NaturalCatastrophe:FloodsDamageKeyFacility

45

ScenarioE-Pandemic:HighlyInfectiousInfluenzaVirus

46

ScenarioF-Governance:EqualPayMovement

47

AbouttheInstituteof

RiskManagement(IRM)

TheIRMistheleadingprofessionalbodyforEnterpriseRisk

Management(ERM).Wedriveexcellenceinmanagingrisk

toensureorganisationsarereadyfortheopportunitiesand

threatsofthefuture.Wedothisbyprovidinginternationally

recognisedqualificationsandtraining,publishingresearch

andguidanceandsettingprofessionalstandards.

Forover30yearsourqualificationshavebeentheglobal

choiceofqualificationsforriskprofessionalsandtheir

employers.Weareanindependent,notforprofitbody,with

membersworkinginallindustries,inallriskdisciplinesand

inallsectorsaroundtheworld.

RiskManagementfortheConsumerSectors4CambridgeCaseStudySeries

ForewordfromtheIRM

ThislatestguidancepaperfromtheCambridgeCentreforRiskStudiesfocusesattentionontotheconsumergoodssector-anareaofvital

importanceforeconomiesinboththedeveloped,anddevelopingworld.IRMisdelightedtobesupportingthisworkonbehalfofourworldwidemembershipandthewiderglobalriskcommunity.

Understandingandmanagingtheriskssurrounding

globalsupplychainshasneverbeenmoreimportant.Inadditiontothetraditionaloperatingandfinancialrisks,organisationsarealsofacingchallengesinrelationto

sustainability,ethics,geo-politicsanddigitaldisruptionofbusinessmodels.

Mostorganisationscanproducealistoftheserisksinariskregister.Howevermovingonfromthisbasicsteprequiresamoresophisticated,consistentandrigorousanalysis.

Thescenariobasedapproachdevelopedinthisreportwillprovideusefulguidancetopractitionerslookingforrobustandobjectivewaysofevaluatingandprioritisingtheserisksinthecontextofthebusinessbalancesheet,linkingdirectlyintotheconcernsoftheboard.

WehopethattheriskcommunitywillnowtakethisworkfromCambridgeand‘roadtest’ittofurtherdevelopnewthinkinginthisarea.

Iwouldliketothankalltheorganisationsandindividuals

whocontributedtothisprojectandalsotheCambridge

teamfortheirfocusedandthoroughapproach,bringing

somenewthinkingonconceptsandtechniquesintotheriskmanagementspace.

SocratesCoudounaris,

BEng(Hons)MScFCIICIPCFIRMIRMChair

RiskManagementDirector,ReinsuranceGroupofAmerica

CambridgeCaseStudySeries5RiskManagementfortheConsumerSectors

ExecutiveSummary

Consumerspendingisavitalcomponentofworld

economies,comprisinginsomecasesupto70%ofgrossdomesticproduct(GDP).Thefuturebusinessprospects

ofconsumersectorcompaniesrangewidelyanddependonbothinternalandexternalforces.Inthiscasestudy,

wehighlighttheapplicationofscenariostresstestsasasystematicapproachtoviewingpotentialfuturesandformanagingemergingrisksfromtheperspectiveofaglobalconsumersectorcompany.

DevelopingaFrameworkforEvaluatingBusinessRisk

Companiesareincreasinglyfocusingonmanagingriskstotheirbusinesses.Anumberofreportsandsurveyssuggestthatmoderninternationalcorporationsmayfacemoreriskthanthoseofagenerationago,drivenbyglobalisation,

interconnectivityoftheeconomy,andachangingrisk

landscape.Regulatorypressuresandshareholderscrutiny

requirebusinessestobemoreexplicitabouttherisksthat

theyface.Organisationsareexploringdifferentapproachestoidentifying,quantifying,andmanagingriskstotheir

operationsandbalancesheet.TheCentreforRiskStudies

(CRS),UniversityofCambridgeJudgeBusinessSchoolis

contributingtothisevolutionofmanagementscienceby

settingoutaformalframeworkforquantifyingrisksto

acompanybalancesheet.Thisreportsetsoutaninitial

methodologyandprocessforquantifyingandcomparingdifferentriskstoabusiness.Itprovidesaframeworkfor

evaluatingtheimpactonthekeyvaluationmetricsofa

businessofsixpotentialclassesofrisk,asaworkedexampletodemonstrateaproof-of-conceptofthisapproach.

AFictionalisedCompanyasaUseCase

Wetakeafictionalisedlargecompany,Avocadoplc,drawnfromsimilarcompaniesintheFTSE100.AvocadoisagloballeaderinfoodandbeveragesthatisheadquarteredintheUnitedKingdom.TheexamplechosenisfromtheConsumerStaplessector,althoughtheapproachisintendedtobe

applicabletomanyothersectorsandbusinesses.Theprofileofthecasestudybusinessisdrawnfrompubliclyavailablesources,andusesinformationmodelledfromseveralreal

businesses,torepresenttheoperations,organisational

structure,geographicalfootprint,internationalmarkets,cashflows,andprofitandlossaccountsofsimilar

corporations.

RisksFacedbyBusinesses

Thebusinessenvironmentforcompaniesisaschallengingtodayasithaseverbeen.Traditionaldimensionsof

inherentriskinconsumersectorsincludethinprofitmargins,globalsupplychainchallengesregardingoperations

andsustainability,andeconomicfluctuationsaffecting

bothretaildemandandcross-bordersupplycosts.Inthe21stmillennium,theseriskshavebeenaugmentedby

ecommercecombiningwithchangingcustomervalues

whichismanifestinaplethoraofdisruptivechallengers

andparalleledbytheacceleratingexposuretobreakdownsandattacksincyberspace.Morerecently,aresurgence

ofnationalismandretreatfromglobalisationhasre-

introducedthethreatofrisingtariffs.Theseissuesareofcourserelevanttomanysectors.

Wereviewtheself-reportedriskregistersfromannual

reportsand10-Ksofglobalbusinesses.Riskregistersvarygreatlyfromonecompanytoanother.Althoughthere

areclearlyidiosyncraticrisksthatmaybeuniquetoan

individualcompany,weconcludethattheheterogeneityofriskregistersismoreduetodifferencestakenby

corporationsintheiridentificationandcommunicationoftheirrisksthaninherentdifferencesintherisklandscapethattheyoperatein.Weproposeamoreformalised

taxonomyofriskstobusiness(seeFigure8),basedon

areviewofself-reportedriskregisters,acatalogueof

historicalcasestudiesofdistressedcorporations,andothersources.

AScenario-BasedApproach

Atransparentandrobustmethodofprioritizingand

evaluatingrisksistorepresenttheserisksbyspecific

instances,namelyscenarios,andthentoestimatethe

consequencesofeachscenarioonthebusinessasastresstest.Scenariosareregularlyexploitedforplanningandriskassessmentintheoilandgasindustryandthefinancial

services;ouraimistobuildonthattrackrecordtobenefitwiderglobalcorporations.

Weproposeamethodfortranslatingeachofthemajor

classesofriskinanorganization’sriskregisterintoexplicitscenarios,representinghowthatphenomenoncouldoccurandthewaysitmightpotentiallyimpactthebusiness,

withvariantstocovertheuncertainties.Thestresstestingofthesescenariosonthebusinessprovidesanobjectivewayofrankingthemandexploringthemosteffectiveriskmanagementactions.Thisreportselectssixillustrative

stresstests,onescenarioforeachoftheprimarythreatclassesinthetaxonomyofriskstobusiness:

>ScenarioA-TradeDispute:UnitedStatesvsEuropeanUnion

>ScenarioB-GeopoliticalConflict:PakistanvsIndia>ScenarioC-CyberAttack:ContagiousMalware

Infestation

>ScenarioD-NaturalCatastrophe:FloodsDamageKeyFacility

>ScenarioE-Pandemic:HighlyInfectiousInfluenzaVirus>ScenarioF-Governance:EqualPayMovement

RiskManagementfortheConsumerSectors6CambridgeCaseStudySeries

RepresentinganOrganizationforAnalysis

Toapplyscenariostoabusinessrequiresastandardized

datastructurefortherepresentationofinformationaboutthecontributionsofdifferentcomponentsofabusinesstoitsoverallfinancialperformance.Thesecomponentscan

beaffectedbyattributesofthescenarios.Werepresentabusinessasa‘DigitalTwin’:arepresentationofthebalancesheetofanorganizationanditsfuturefive-yearearnings,deconstructedtothemarkets,products,production

processes,andsupplychainsofthecompany,withtheirrepresentative‘enterprisevalue’tothatbalancesheet.

Eachscenariostresstestistranslatedtoshockeachofthesecomponentsandthusestimatethelostvaluethatwould

result,ifthatscenarioweretooccur.

AStandardizedMetricforComparingRisks

Ourapproachprovidesamethodforcomparingscenariosfromriskswithwidelydifferentcharacteristicsina

standardizedwaybyevaluatinghoweachscenarioimpactstheprocessesandassetsoftheorganizationtoultimatelyaffectthefundamentalsofthebusinessexpressedasa

potentialmonetarylossmetric.Thisprovidesaconsistentriskmetricthatismeaningfultomanagers.Enterprise

ValueatRiskisaproxyforstockpriceinstability,andcanbederivedforawiderangeofdifferenttypesofrisk.

Discountedcashflow(DCF)modelsarewellestablished

methodsofcalculatingvaluationsofbusinesses.We

applyafiveyeardiscountedcashflowcalculation,ignoringtheterminalvalue,toderivecomparativemetricsfor

thebusinesswithandwithoutthescenariooccurring.Thedifferenceinenterprisevalueoverfiveyearsisthevaluationatriskfromthatscenario,whichwecallthe5yrEnterpriseValue@Risk,shortenedto5yrEV@Risk.

Conclusion&FuturePerspectives

Despitetheunpredictabilityofeachthetypesofscenariosconsidered,weviewallsixtypesasforeseeableinthat

historyprovidessomebasisforestimatingfutureimpacts.Thebusinessimpactofunpredictableeventscanbe

assessedbystresstestscenariosthatvarysignificantlyinscale,severity,andtypeofimpact–theycanaffectanybusinessincontrastingways.Quantifyingthese

risksthroughasinglemetric,5yrEV@Risk,allowsforanassessmentofthematerialityofindividualriskstoanorganisationaswellasdirectcomparisonbetweenverydifferentrisks.Thisprovidesvaluableinsightsintothedimensionsofthecompany’soperationsorfinancial

structurethatarevulnerabletothesethreats.

Thereisabroaderandcontinuingpushfortransparency

inrecognitionanddeclarationofriskexposurewithin

theprivateandpublicspheres.Quantifyingriskappetite

andbuildingthedataandanalyticstomonitorafirm’s

performancerelativetoitsriskappetitethresholdsis

challengingbutanaspirationformanyorganisations,evenforhighlyunpredictablerisktypes.Aclearerpictureofthelinkbetweenthestructureofapubliccompany,itsrisk

exposuresanditsmeaningfulmitigationsisanambition.Financialandgovernancestructuresalsoplayaroleinriskexposuresandinassessingandmitigatingrisks.

TheCambridgeBusinessRiskTaxonomy(Figure8)providesastartinglistofrisktypesforanorganisationwhichhasnotyetbuiltitsowncomprehensivelistofriskdrivers.Second,businessstresstestsareneededforemergingrisksaswellasshockevents.Thirdisquantifyriskmitigationactivitiesandinvestments.Thegoalistodevelopstandardised

processesthatallowcomparisonofbusinessconsequencesacrossacomprehensivelibraryofriskscenariosandthus

atransparentcost-benefitapproachtomanagingriskappetiteandresilience.

Thisreportfocusesonaquantitativeviewofacompany’sbalancesheettosixstresstestscenariosthatrepresent

awiderangeofdisparateanddifferingtypesofrisk.We

illustrateanapproachforcreatinganintegratedviewacrossallrisksfacedbyanorganizationandthatriskswithwidelydifferentcharacteristicscanbecomparedinastandardizedwaythroughour5yrEV@Riskmeasurement.Thisisshownbyexamplesfromeachofthemajorclassesofrisksthatarecommonlyfoundinriskregistersandservesasafoundationforcomparativeriskassessmentandunderstandingcost-

benefittradeoffsinmitigations.

CambridgeCaseStudySeries7RiskManagementfortheConsumerSectors

UnitedStates

UnitedKingdom

Italy

Canada

Japan

France

Germany

Section1:Introduction

Consumerspendingisavitalcomponentofworldeconomies,comprisinginsomecasesupto70%ofgrossdomestic

product(GDP).Thisincludesexpendituressuchasfood,clothing,housing(rent),energy,transport,durablegoods(notablycars),healthcosts,leisure,andmiscellaneous

services1.Figure1showshouseholdspendingasa

percentageofGDPforeachG7country.Thefuturebusinessprospectsofconsumersectorcompaniesrangewidelyanddependonbothinternalandexternalforces.Inthiscase

study,wehighlighttheapplicationofscenariostresstestsasasystematicapproachtohighlightingthepotentialfuturesandformanagingemergingrisksfromtheperspectiveofaglobalconsumersectorcompany.

Theconsumersectorsfacenumerouschallengestoday

astechnologycontinuestodisplacetraditionalbusiness

modelsandstructures.Consumersareusingmultichannel

purchasingexperiencesformoreoftheirconsumption,

evenlargeticketitemslikeautosareavailableforonline

purchasingwithpickupfromcarvendingmachinesand

homedelivery.2Withinarelativelyshortperiodoftime,

technologyhasenabledmanyconsumer-centricservicesandproductstoelevateoverallexperience,convenience,choice,cost-efficiency,seamlessness,transparency,andselection.

Similarly,expectationsofconsumershavenormalisedsuchthatallbusinessesarenowjudgedtothesameefficiencystandardssetbyleadinge-commercecompanies.

Globalcorporationsfacemorerisksthanthoseofa

generationagobecauseofcomplexitiesfromglobalisation,interconnectivityoftheeconomy,andachangingrisk

landscape.Regulatorypressuresandshareholderscrutinyrequirebusinessestobemoreexplicitabouttherisksthattheyface.Organisationsareexploringdifferentapproachestoidentifying,quantifying,andmanagingriskstotheir

operationsandbalancesheet.

Mostglobalcompanieshaveriskdepartmentsthat

arebecomingincreasinglyaccountablefortherisks

totheirbusinesses.Riskmaturitylevelsofsectorsvary

dependingontheirhistoryandlevelofadoptionofriskmanagementpractices.Bysomeaccounts,theconsumersectorcompaniesareconsideredtobelessmature

thanothersectorsthathavehighdegreeofregulatory

oversight,significantnaturalresourceexposure,humanhealthandsafety,andlargelevelsofcapitalinvestment.3Riskmaturecompaniesacrossallsectorsshowpositive

correlationstostockpriceperformance,materiallylowerstockpricevolatility,higherstockpricetoearnings(P/E)

ratios,andlowerpremiumsforDirector’s&Officer’s(D&O)insurance.4Goodpracticesinriskmanagementserveto

avoidorrespondeffectivelytocriseswhethertherisksarerecognisedoremerging.

Figure1:HouseholdSpendingofG7Countries(%ofGDP).

010203040506070

Source:CambridgeCentreforRiskStudies;DatafromOECDNationalAccountsStatistics:NationalAccountsataGlance

1(OECD2019)

2(Kunz2019)

3(Pergler,n.d.)

4(“AonRiskMaturityIndex”2017)

RiskManagementfortheConsumerSectors8CambridgeCaseStudySeries

Traditionally,riskssuchasrecessions,reputation,consumersentiment,businessmodeldisruptions,andsupplychainshavebeenkeydriversofriskfortheconsumersectors.

Whilehighseverityshocksinthoseriskareaswillalwaysberelevant,trendssuchaschangesinclimateandsocialsentimentregardingenvironmentalissuesrepresentnewclassesofriskswhichhaveyettofullymanifestthroughcompanybalancesheets.Wearguethatcurrentrisk

managementpracticesofglobalcorporationsmayneedtoberethought,orevenreinventedtoaddresstailrisks-includingprocessesfortheiridentification,evaluation,mitigation,andmonitoring.

Thisreportsetsoutaninitialmethodologyandprocessforquantifyingandcomparingdifferentriskstoabusiness.Itprovidesaframeworkandproof-of-conceptforevaluatingtheimpactonthekeyvaluationmetricsofabusinessofsixpotentialclassesofriskthroughaworkedexample.

Theresearchpresentedinthisreportispartofthe

CambridgeCentreforRiskStudies’researchtrackon

corporateriskprofilingincollaborationwiththeInstituteofRiskManagement.Itisinformedbyviewsfromrisk

managementspecialistsrepresentingcompanieswithintheconsumersectors.Thegeneralobjectivesofouroverallresearchprogrammesaretobetterunderstandcurrent

views,practices,andmitigationsofrisksatcorporationsandhowtheyareadaptingtomeetfuturechallenges

andopportunities.Whilethisreportfocussesonglobal

corporationswithintheconsumersectors,weexpect

organisationsfromothersectorstofindconsiderable

overlapsonthedefinitionandapplicationofscenariosaspartoftheirriskmanagementprocesses.

AFictionalisedCompanyasaUse

Case

Thiscasestudyappliesscenariostoasinglecompanyto

highlightthepotentialquantitativeimpactsofthescenariostoitsbalancesheet.Wetakeafictionalisedlargecompany,Avocadoplc,drawnasanamalgamationofanumberof

largeconsumersectorcompaniesintheFTSE100.AlthoughAvocadoplcisanotionalfirmintheConsumerStaplessector,theapproachisintendedtobeapplicabletomanyother

sectorsandbusinesses.Thecompanyprofileisdrawnfrompubliclyavailablesourcesandinformationismodelledfromseveralrealbusinessesontheiroperations,organisationalstructure,geographicalfootprint,internationalmarkets,

cashflows,andprofitandlossaccounts.

CompanieswithintheConsumer

Sectors

WerefertotheConsumerSectorsasthecollectivefor

companieswithintheConsumerDiscretionaryandConsumerStaplessectors,usingtheterminologyoftheGlobalIndustryClassificationStandard(GICS).5Consumerdiscretionaryisthetermgiventogoodsandservicesthatareconsiderednon-

essentialbyconsumers,butdesirableiftheiravailableincomeissufficienttopurchasethem.6Examplesofconsumer

discretionarygoodsincludedurablegoods,apparel,

entertainmentandleisure,andautomobiles.Whereas

consumerstaplesareessentialproductsthatconsumers

demandregardlessoftheeconomicconditions.7Examplesofconsumerstaplesincludefood,beverage,householdgoods,alcoholandtobacco.

TheGICSstructureconsistsof11sectors,24industry

groups,69industries,and158sub-industriesandappliestocompaniesglobally.AlternativeclassificationstandardsforfutureconsiderationincludetheStandardIndustrialCodes(SIC),andNorthAmericaIndustrialCodingSystem(NAICS).

Thiscasestudyispartofthe“CambridgeCaseStudySeries”–acollectionofanalysesofriskmanagementpracticesofglobalcorporations.Thereismorepubliclyavailabledata

oncompaniesintheUSandEuropethanotherregions

andliteratureandmediacoverageofbusinessactivities

andreportingintheseregionstendtofollowsuit.Likewise,thedataandanalysisinthiscasestudyhavegreaterfocusonsectorsandcompanieslocatedintheUSandEurope.

Additionally,thiscasestudycoverstopicsrelevanttopubliclylistedcompanieswithtraditionalbusinessmodelsversus

privatelyheldcompanies.

5(S&PGlobal&MSCI2018)

6(Investopedia2019a)

7(Investopedia2019b)

CambridgeCaseStudySeries9RiskManagementfortheConsumerSectors

GrossMerchandiseValue($B)

Section2:TheBusiness

EnvironmentforConsumerSectorCompanies

Consumercompaniesarewell-positionedtobenefitfromaninternationalandinterconnectedmarketplaceshapedby

globalisation.Ontheotherhand,technologycontinuestodisplacetraditionalbusinessmodelsandstructuresandthewor