Overview
Principles
 Your industry risk
Consumer goods
Energy + utilities
Financial services
Gaming + leisure
Pharmaceutical
Property
Telecommunications
Law of the Jungle ® Marketing
The Better Business Program
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Risk profile
One word captures what's at stake for companies manufacturing or marketing consumer goods: brand.
You don't need to look far to understand how fast, and how fatal, brand damage can be to a corporate franchise.
Consider the fate of Arthur Andersen. The failure of one client, Enron, saw the collapse of this Big 4 accounting firm before any legal claim or court case.
Look what happened when Amcor's Managing Director was implicated in a trade practices violation: the share price dropped 11% in 24 hours and he was gone within weeks, along with a group of senior executives.
Consumer goods companies own or manage brands. That's their business. Successful brand management is core to their business.
Consumer perceptions are a volatile measure of brand value which is highly sensitive to adverse influences. A single error in execution or a transgression by a manager could represent a substantial and open-ended exposure to the brand.
Risk factors
- The consumer goods sector is a relatively mature industry, highly competitive, margin driven and highly globalised. In the battle for market share and speed to market, logistics is the challenge and the steps in execution, including compliance checks and review processes, typically come under intense pressure.
- Corporations marketing consumer goods are usually challenged by volumes - products, catalogues, communications. The law of averages elevates the relative risk by volume alone.
- Then there's the people factor: staff turnover, inadequate training, dangerous assumptions or execution oversights. They're normal and understandable. But the law is strict. The corporation is responsible for the costs and losses associated with these errors.
Risk quantification
- Each year the ACCC receives thousands of complaints about advertising and marketing issues alone. Assuming (as in recent years) the ACCC pursued just 10% of these, then it would have taken action on average more than 6 times per day, every day of the year!
- But if that looks high, you are 4.5 times per more likely to be taken to court by a competitor or business partner than by the regulator. Like many other statutes, the Trade Practices Act in Australia gives rights to anyone to complain. Competitors increasingly use the courts as a forum for the competitive battle.
- If a claim does ensue, you can be looking at a major six figure sum even if you win! In some cases, the all up cost may creep into seven figure amounts. Even a minor complaint, heard by an industry body or quietly resolved, will take up valuable executive time, legal fees and out of pocket expenses.
- Yet the biggest risk for consumer goods companies is to reputation. Even a minor consumer claim can impact adversely. Once a claim is in court, it's often not possible to quietly resolve it and move on. Worst of all, most legal claims include injunction applications - which means you might have to pull your product or campaign. The loss of budgeted revenue can be enormous.
Would you like to quantify your risks and process costs? Contact Law of the Jungle about our Cost & Risk Metrics.
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