Evaluation of opportunities and risks is a constantly evolving field. Dabur recognizes that in the normal course of operations, its activities are routinely exposed to the risks that are both global and local in nature. We proactively seek to identify, manage and, wherever possible, mitigate these risks to the extent possible. At Dabur, we follow an institutionalised ‘Dabur Risk Management Framework’ that allows us to identify risks impacting our business and deploy organization-wide processes for managing these risks.
Our Risk management committee determines the risks in relation to the achievement of business objectives and appropriate risk responses. It is responsible for ensuring the effectiveness of our company’s risk management framework, which helps the organization to respond to identified risks through acceptance, avoidance, transfer and mitigation and also seek opportunities in assorted risk scenarios.
The risks are identified based on their likelihood and severity and are categorized into critical and noncritical risks where the high and medium risks are part of critical risks while the low risks are part of noncritical risks.
Risk Governance Structure
Identifying and managing risks that have the potential to affect our objectives and operations is an essential part of our risk governance framework. Dabur has empowered its group functions, making them accountable for risk identification within their area of responsibility, and these are presented to the Management Committee. These material business risks are also regularly reported to the Board, along with their controls and mitigation treatments.
Risks are owned and managed by line management. Risk function facilitates the conversations and help monitoring the action plans. Critical risks are escalated through existing reporting lines.
Three Lines of Defence Model
| First line (Prevent risks) | Second line (Prevent & detect risks) | Third line (Detect risks) |
| First line (Prevent risks) |
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Over the years, the Company has established a very robust first line of defence through a combination of people, process and technology. There are well defined policies, procedures, responsibilities and system controls to prevent the occurrence of risks. Automation and digitization of processes have further enabled to reduce risk and enhance governance. |
| Second line (Prevent & detect risks) |
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Second line of defence plays an important monitoring role. The Company has established a comprehensive management reporting framework and leverages data analytics for monitoring key performance indicators (KPI) and key risk indicators (KRI) |
| Third line (Detect risks) |
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Independent assurance function serves as a third line of defence. It helps accomplish objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, controls, and governance processes |
Risks for FY 2022-23
| Risks | Description | Impact | Mitigation Action | Capital Impacted |
| Key Risks | ||||
| Regulatory risks | Changes in existing regulations/emerging regulations impacting sourcing of materials, emissions, waste generation, storage and use of material or quality of finished goods. New regulations that may have an impact on business include the Food Safety and Standards Authority of India's (FSSAI) regulations on high fat, sugar, and salt (HFSS) products. | Continued changes in the regulations and tax structures influence the fundamentals of the business. The Regulatory environment in the Consumer Goods industry continues to evolve with newer Health & Safety norms in the works. While some regulatory changes create new business opportunities, others come with significant costs and business restrictions. |
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| Counterfeit products | Counterfeit and spurious goods pose a vast global challenge, affecting nearly every industry and resulting in substantial losses for both the private sector and governmental organizations. | The presence of counterfeit is specifically high in the FMCG industry, causing significant losses to the industry and the Government. Not only are they a major drain on the National exchequer, spurious products also lead to loss of consumer confidence in the brand. Since makers of counterfeit products do not follow any quality checks and use spurious ingredients, they result in serious health and safety risks for consumers. The spurious products also impact a product's brand image, and consequently sales. |
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| Supply Chain | Limited availability of critical raw materials for production, Single Vendor Sourcing creates vulnerability in the supply chain. Any issues or disruptions with the vendor can lead to supply shortages, delays, or quality concerns. | Limited availability of some critical Raw Materials may result in loss of production and higher cost. Single vendor sourcing of some key raw and packaging material also runs the risk of delay in supply or higher percentage of rejection, leading to loss of production and even has a possibility of monopolistic pricing. |
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| Inflation Risk | Inflation can increase the cost of production, raw materials, and labour, reducing profit margins percentage. It can also impact consumer purchasing power. | We are subject to market risk with respect to commodity price fluctuations in a wide range of raw material and packaging material which are used by us. Inflation has remained at its peak levels all through 2022- 23. The resultant frequent prices hikes led to a consumption squeeze as consumers downgraded to affordable lower unit price packs. |
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| Non-Critical and/or Mitigated Risks: In addition to the above risks that are captured in our Risk Register, we have identified some non-critical risks. However, action has already been taken to mitigate these risks. As of now, these risks have already been mitigated. | ||||
| Occupational Health & Safety | With a workforce of over 7,700 employees in 15 countries, providing a safe and healthy working environment is an absolute necessity. | The potential of accidents, fire incidents occurring at company premises poses threats to employee safety, property damage and business continuity. |
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| Exchange Rate Fluctuations | Owing to the international nature of our business, Dabur is exposed to transactional foreign exchange risks from fluctuations in exchange rates, within the scope of our business activities. | The principal foreign exchange transaction exposure arises from imports/ exports from/to various countries across the globe for the sourcing of raw material and sales outside India. |
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| Climate Change | Climate change phenomenon like El nino characterized by the warming of the Pacific Ocean, leading to shifts in weather patterns globally. Climate change can have significant impacts on agriculture, transportation, and supply chains, affecting businesses' operations and performance. | The potential impacts of climate change are diverse. While it may lead to increase in water scarcity in some parts of the world; in other places, greater rainfall would lead to floods and result in damage to crops. Alongside, there’s also an increase in demand for natural resources. With a portfolio of products based on Nature and natural ingredients, our long-term prosperity will depend on continued availability of these natural resources. Any risk that threatens these fruits of nature will have an impact on our business as well. |
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| Reputational Risk | A threat to the positive perception about the company and its products in the minds of key stakeholders, particularly consumers. | A rise in consumer complaints and social/ digital activism may have negative consequences like loss of business and Revenue; loss of current and potential employees; bad will on behalf of the public; Additional scrutiny by the Government and Regulatory authorities; Embarrassment/Loss of face. |
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| Emerging Risks | ||||
| Information Security | With increasing digitalization and datadriven operations, emerging risks in data privacy involve potential breaches, unauthorized access, loss of sensitive information or breakdown in systems. | A cyber-attack or non-availability of IT systems could have severe financial, regulatory and reputational consequences for our business. We face the risk of leak or misuse of sensitive data and information, including production plans, investment strategies and new product launches. With AI gaining traction, there is also the risk of losing important and confidential information over the Internet. |
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| Product and Plastic Packaging | The emerging risk associated with plastic packing material relates to increasing concerns about environmental sustainability and regulations restricting the use of plastic. | The regulatory environment with respect to plastic packaging and responsibly disposing packaging waste is evolving. Failure to comply with current or future regulations on plastic packaging or failure to meet commitments on packaging and the environment would attract hefty fines and may even lead to loss of Sales. |
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Business Continuity Plan
Dabur India Ltd started as a small Ayurvedic pharmacy in the bylanes of Calcutta (now Kolkata). Over the past 139 years, Dabur has transformed itself into a transnational consumer goods enterprise with a footprint in over 120 countries across the globe.
Our legacy is a reflection of its strategic business continuity planning. Dabur has successfully met consumer needs for more than a century now. This was possible because of its phenomenal resilience, its ability to change and adapt to the ever-evolving needs of the consumers ahead of others, and its integrated approach to managing risks.
Our relentless focus on enhancing operational efficiency, building a robust ecosystem of supply chains, and strengthening our IT infrastructure has helped us to function with as few disruptions as possible. The onslaught of COVID 19 and its rippling effects on the global economy posed business continuity challenges for many industries and organizations. However, Dabur stood firm against the odds with a strong business continuity plan in action. Our operational efficiency is supported by a multiphase production facility wherein multiple plants can be used alternatively to ensure seamless production activities even in unprecedented scenarios like plant shutdown or plant failure. External Dependency is one of the major issues posing threat to business continuity.
We, at Dabur, are by all means prepared to overcome the challenges posed by external dependency. Our robust ecosystem of supply chains expands across multiple chains of suppliers thus mitigating the risk of dependency on just a handful for the supply of key raw materials. We select our suppliers and vendors only after conducting risk assessment activities. As a part of incident responsive activities, we focus on finding alternates for all our key input ingredients.
To keep pace with today's digital-first world, our focus at Dabur has also shifted towards strengthening our IT infrastructure to ensure business continuity. Digitally equipped organizations were the first ones to recover from the effects of COVID, we believe in the power of technology and are committed to leveraging our technical abilities. Our Business Continuity Plan also highlights testing of the restoration plans of IT applications in case of a critical IT application disaster. As suggested in the plan, our management has completed testing of action plans for almost all IT applications except a few.
A business continuity planning study will be undertaken to reassess our BCP and make improvements whenever the need arises.
Annual Report 2022-23