Weighty Issues
Despite this, PepsiCo’s board has increased its focus on business risk issues in the last few years. One growing concern for the company in these health-conscious times is the fact that its name is synonymous with a corn syrup-laden
beverage packing 41 grams of
sugar per 12-ounce can. “We’re concerned about obesity, given the legal challenges of the past two years,” Lardieri argues, alluding to a lawsuit filed against McDonald’s in 2002 that alleged that the burger giant used deceptive advertising to portray its products as healthy. “Is there a tort attorney who could turn Pepsi into tobacco?” Lardieri muses.
PepsiCo is not about to stop selling soda and chips. “Actually, anything in excess is unhealthy,” Lardieri says. But the company has taken steps to fend off legal challenges by unveiling a label called Smart Spot, which now appears on its healthier products, including bottled water, Tropicana juices, Gatorade and Quaker cereals. The aim of this kind of risk management, Lardieri says, “is not to reach the ‘Oh, shit,’ point.”
One way boards can prepare for bolts from the blue—be they margin-crushing increases in the price of a raw material, extensive fraud by a faceless junior accounting factotum or an increase in social awareness about the risks of obesity—is to establish a rapid-response team. James Newfrock, vice president at the Booz Allen office in Parsippany, N.J., recommends that every CEO identify first, second and third lieutenants to manage a crisis plan. However, he has seen few companies establish these corporate SWAT teams. “Let’s face it: Risk management can be depressing,” he says. “Sales people think about risk perhaps 5 percent of the time. A CEO should be thinking about it all the time. Fighting fires is not pleasant.”
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