Coca-Cola Enterprises Formulated a Formal Risk-Assessment Approach

Coca-Cola enterprises formulated a formal risk-assessment approach in 2003 that divided their business environment into 5 categories: financial, operational, social, environmental and ethical considerations.

In order to better assess the various risks that potentially impact their business in each of these areas, they divided each of these into a further six categories:

Reputation and Image,

Business and Operations,

Political and Regulatory,

Market and Financial,

Information Technology and Business Process Change,

People and Organization.

By focusing attention on each sector in turn and paying close attention to potential risks and possible market changes, Coca-Cola is able to move towards the future in a progressive and optimistic manner.

An example of their risk evaluation in operation is paying attention to the People and Organization sector when, Coca-Cola may, and indeed has noted in the past, that consumers are more interested in healthy beverages. Seeking the best for their organization and seeking profit rather than loss, the management set about producing innovative beverages that would satisfy this new trend.

In 2005, the management decided to review their risk paradigm and the planning structure on a monthly process. Executive sponsors are chosen for each of the 6 sectors and each of these sponsors are responsible for reporting on their specific category to a Board of Directors or to certain board members as the case may be.

In 2010, Coca Cola also requested an external agency to review their risk assessment approach and to recommend improvement.

In their mundane operational level, each facility at Coca-cola also has its own comprehensive risk assessment along with a mitigation programs. The Coca-cola company and the Coca-Cola Enterprise work closely and jointly together to maintain a joint Incident Management and Crisis Resolution process.

Coca -Cola also has a similar set up in other parts of the globe such as in Europe in order to predict, prevent and deal with risks that may occur and to minimize negative impact on employees, consumers, customers, assets and business operations. (Coca-Cola Entreprises Inc. ).

Work invested in preventing incidents from occurring and dealing with risk factors when they do occur can be potentially costly as Ballou et al. (2009) indicate in a macro manner and as Juras (2007) discusses in regards to outsourcing. Organizations have to be cognizant of both direct and indirect costs associated with each of the risk factors. Sometimes, for instance, an executive sponsor may become so involved in dealing with one of the risk factors that they may fail to realize the costliness of his theorized project. Presumably then -- but not always -- the Board may set him to rights.

The specific executives involved with the risk program are advised to quantity risk reduction costs, in order to be able to better assess the net benefit of their proposed solution. The Coca-Cola risk assessment approach is strong in its attention to detail and consistent review. Attention, however, too, must be given to involved coasts as per the recommendations of their Enterprise resource Management Framework.

As an aside, I have also noticed that there is no sector set aside for legal risks. It may be that legal risks is included in some other category such as Business and Operations. If not, Coca-cola certainly needs an entity almost exclusively, if not totally, devoted to quantifying and managing legal risk: "Legal costs can range from 3% to 10% of a business's annual revenues, so companies need to have a good method for managing legal risk" (Johnson & Swanson, 2008). This is particularly so in the case of a company as complex and renowned as Coca-Cola. It cannot afford the tarnish of legal factors.

Taking these gaps of cost/accounting procedures into consideration in their risk assessment paradigm makes their approach more complete.