Tate & Lyle Risk Management - Case Study Example

Tate & Lyle Name Course: Institution: Date: Tate & Lyle Executive Summary Tate & Lyle plc is British Multinational Corporation which specializes in agribusiness. The company is listed in the London Stock market and is also a global provider of high quality ingredients and other food ingredients. Through its board of directors, the company has been able to demonstrate the principles of good corporate governance is through the idea of collective responsibility governance practices in accordance to the UK corporate governance code by collective responsibility in ensuring the success of the company. The company through the board can ensure the development of risk management ensure the development of polices of recruiting and training its staff on areas of weaknesses, strengthen and update their skills on consumer interaction and engagement. It is through these engagements that the company will become a customer focused business and minimization of the negative effect of the risks. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Company overview 4 Corporate governance 4 Risk Management 10 Risk identification and appraisal 10 Risk management 13 Conclusions 15 References 16 Tate & Lyle Introduction Company overview Tate & Lyle plc is British Multinational Corporation which specializes in agribusiness. The company is listed in the London Stock market and is also a global provider of high quality ingredients and other food ingredients. Through its large scale and efficient manufacturing plants, the company has been able to use innovative technology in turning raw materials to high quality ingredients for its customers. The vision the company aims at becoming the leading multinational provider of specialty food ingredients and solutions. The company is dedicated towards the management through effective governance and good management practices. In addition, the company also envisions beginning a series of operations in Central Asian countries which include Kazakhstan and Uzbekistan. This will require a risk management assessment of these areas. The main objective of this report is to evaluate whether the board of directors at Tate & Lyle demonstrate the principle of good governance according to the UK corporate governance code. Corporate governance The board of directors at Tate & Lyle is committed to high standards of corporate governance which is perceived to be integral to be achieving the objectives of the company and maximize shareholder value (Tate & Lyle 2012, p. 10). The company through its governance statement has been able to documents its objectives by asserting that the shareholders, being the owners of the company, have the right to be provided with information related to the company and to be inquisitive on possible strategies that the company is developing to ensure that the shareholders are satisfied with the direction chosen by the company (Blowfield 2012, p. 362). One way by which the board has been able to demonstrate the principles of good corporate governance is through the idea of collective responsibility governance practices in accordance to the UK corporate governance code is through collective responsibility in ensuring the success of the company (Fisher 2010, 6). This has been through the ability of this board to provide entrepreneurial leadership. This in the view of the board must always be in accordance with the model of prudent and effective control that enable easy assessment and management of risks (Davies 2006, p. 11). This is one way through which the company’s board has been able to set the company’s objective in ways that ensure that all the plausible financial and human resources are positioned to enable the realization of these objectives. It is against these objectives that the company has the ability to meet and review the performance of the management (Monks & Nell 2008, p. 40). The board of directors are therefore the representatives of the shareholders whose communication to the management is often based on the desire to ensure that the management realizes the objectives of company owners. It is therefore through corporate governance that board of directors in Tate & Lyle stets the values of the company and reputable standards to ensure that its obligations to those shareholders and other stakeholders within the organization are understood and realized (Monks & Nell 2008, p. 40). Reporting to shareholders is one of the best governance practices that are expected of any board of directors. The government of the United Kingdom and other regulatory agencies have been involved in the introduction of numerous reporting requirements that are applicable to Tate & Lyle (European Centre for Corporate Engagement 2010, p. 8). These reports have been considered as new editions in the corporate governance code which provides directors with a platform of accepting or denting that the annual reports and accounts taken from the wholesome perspective is fair, balanced and understandable (Davies 2006, p. 10). Through this platform it has become possible for the board of directors to improve on the preparation of enhanced reporting techniques. This means that before the eventual annual reports are published all the members of the board must be involved in a process that is assumed as transparent (Monks & Nell 2008, p. 41). An additional way by which the company’s board has been able to ensure successful corporate governance is by regularly reviewing the areas of focus for the board. These encompass those areas that it will continue to devote significant time in different operations. One of the areas of focus for the board has been safety (Stittle 2010, p. 23). These include effectiveness of new initiatives that are aimed at the improvement of hazard identification and the prevention of accidents in almost all situations. Good corporate governence in the UK requires that polices developed by the board of directors must be dedicated towards the realization of high safety standards (Monks & Nell 2008, p. 44). Shareholder and customer engagement is considered by the company’s board of directors as one of the most essential aspects as part of good corporate governance and best management practices. This the company has ensures through the development of effective customer relations and marketing strategies (European Centre for Corporate Engagement 2010, p. 11). For shareholders, the company through its board of directors has been able to ensure that the shareholders meet at least once every year on issues of company development. The organization of Annual General Meetings for instance has been considered as one of the best management governance practices of the company (AIMA 2014, p. 5). The existence of online platforms of communication has made it easier for shareholders to access information from the company among considering the ability and the decision by Tate & Lyle to project all its information regarding the welfare of the company (Welch 2013, p. 179). Transparency and gender sensitivity in issues of management has also been considered as one of the essential determinant of the operations of the company essentially on matters related to corporate governance (Fisher 2010, 7). The company has been able to administer its dedication to adhering to these elements of corporate governance by ensuring that almost 25% of its management and employees are drawn from the less represented gender (Monks & Nell 2008, p. 55). This in one way has been used by the directors to voice the ability of the company to promote cohesion in the UK society. Transparency has become part of the company’s policy considering that the management has been able to establish polices that dedicated towards streamlining the operations of the company (AIMA 2014, p. 6). Furthermore, the company has also been able to demonstrate high levels of transparency through its ability to announce its financial performance on its website and in the stock market. This is in accordance with the requirements of corporate governance code in the UK which demand high level of financial responsibility from the board of directors (Tate & Lyle 2012, p. 11). The company through its board of directors develops principles that operate in accordance with its organizational context. This has been demonstrated through the company’s system of internal control which is a reflection of its control environment and should have the capability of engaging in quick response to evolving risks to business activities that arise from factors within the company (AIMA 2014, p. 6). This also aims at changing the business environment. The company’s board of directors operates on the principle of corporate governance. According to the corporate governance code of the UK, it is the responsibility of the board to ensure the existence of a satisfactory dialogue with its shareholders. It is the responsibility of the board to ensure that its annual financial report is presented in a meaningful manner as considered necessary by the board. This is the information that is necessary to ensure that the shareholders understand the company’s strategies and systems of internal control (Tate & Lyle 2012, p. 12). According to the corporate governance code in the UK, it is the responsibility of a company through its board to consider the development of sustainable organizational objectives. Tate & Lyle has been able to adhere to these requirements by ensuring that its organizational environment is continuously evolving in ways that are in accordance with the requirements of the prevailing environmental conditions (Monks & Nell 2008, p. 54). Non-engagements of institutional shareholders in the company issues may lead to loss of investors in the long term. This is because institutional shareholders play the role of holding shares on behalf of millions of entities and individuals. These shareholders have fiduciary interests of the underlying investors. This role does not end with financial performance; instead it is extended towards ensuring that companies that they invest in have sufficient corporate governance mechanisms (Davies 2006, p. 20). When Tate & Lyle chooses the non-engagement approach to institutional stakeholders there is a high possibility that the company may miss out in its ability to obtain high levels of influence and performance in the competitive market (Mehta 2013, p. 3). In such situations it is possible for issuers to fail to recognize the essence of effective shareholder engagement and the level of influence that they possess in relation to their ability to influence the perspective of the board of directors. Failure to engage the shareholders may therefore be an indication that the company through its board of directors is failing in its role of realizing the objectives of the company (Mehta 2013, p. 4). Non-engagement of shareholders may also occur in situations where a company such as Tate & Lyle only engages shareholders during scheduled shareholder events. Events such as analyst calls, public announcements and annual shareholder meetings may fail in the realization of company objectives since inmost cases they are perceived as mere formalities and events of little value towards ensuring complete engagements of institutional shareholders in matters related to the governance of the company (Beale 2010, p. 76). The prevalence of such activities in the situation of Tate & Lyle, do not translate into positive growth of the company especially on matters related to the attraction of more shareholders into the company. In addition, non-engagement of institutional shareholders in matters related to the operations of the company may result in reduced levels of communication between the management, the board of directors and the shareholders. Limited or no communication among such stakeholders in the company would mean that the shareholders will be less aware of the activities of the stakeholders except in crisis situations or when performance issues arise within the company. This means that constant and significant communication among different stakeholders in an organizational setting is essential to enable earlier and prompt identification of performance issues to enable the developments of lasting solutions to these problems. Non-engagement of shareholders on matters related to the operations and Tate & Lyle may be detrimental to the performance and overall development of the company. This is because through shareholder engagement it is possible for company owners to develop a mutual relationship with the management and other employees (Beale 2010, p. 78). It is also a way through which the management is able to provide information on different aspects affecting the company according to their areas of specialization (Davies 2006, p. 14). The CEO, who possesses knowledge on strategic issues related to the development of the company, can meet the shareholders on matters related to company development. Furthermore, other issues such as executive compensation and matters of corporate governance would require chairs of different committees to communicate and engage with the stakeholders. When Tate & Lyle fails to engage these shareholders it is possible that these individuals will acquire information from unauthorized personalities leading to the probability of miscommunication hence damaging the reputation of the company (Davies 2006, p. 17). The method through which the engagements between the company and the shareholders occur has been considered instrumental in the development of the best possible relationship between the management, the board and the shareholders. Failure to use a combining portfolio approach has been considered to be damaging to the ability of the company to reach-out to majority of the shareholders with limited effort (Beale 2010, p. 77). Risk Management Risk identification and appraisal The decision by Tate and Lyle to introduce it supply chain in Central Asia counters has been considered as a technique of expanding its presence in the highly competitive Asian market. this is can be used in the provision of evidence that for the company to experience any form of growth in terms of profit margins and customer base it will be important to assess the possible risks involved in the process of expanding its operations (Blowfield 2012, p. 362). The company through its board of directors operates on the understanding that it is exposed to numerous risks which when they fail to manage, can have adverse effects on the reputation, financial performance and operation of the company in Central Asia (Financial Reporting Council 2014, p. 4). It is the overall responsibility of the Board of Directors to identify and seek solutions to the risks identified by the management. Tate & Lyle is a company which focuses on food industry, expanding its supply chain in Central Asia may result in failure to maintain safe and continuous operations of its facilities. The safety of the company’s stakeholders in its areas of operations is paramount (Tate & Lyle 2012, p. 2). However, the company also understands its responsibilities to operate in accordance with the local laws and regulations on matters of health and environmental safety standards (Chapman 2013, p. 100). The risk arises from the possibility of substandard performance resulting from improper installation or operation of critical equipment. Failure by the company to operate in accordance to the required standards may lead to adverse economic, political and financial effects such as negative reputation considering that it is a foreign company hence a reduction in sales (Blowfield 2012, p. 366). The vision of the company is to be the leader in the provision of specialty food ingredients and solutions on the global platform. However, relatively harsh environmental conditions in Kazakhstan for instance may deprive the company its ability to grow in speciality food ingredients (Financial Reporting Council 2014, p. 8). Failure to deliver on this strategy in the long term may result in a reduction of trust levels and downward trend of its sales and finances. This in most cases has been considered as one of the greatest risks that the company faces in countries that experience high pollution levels and lengthened drought periods which make it relatively difficult to grow, process and sell rain fed food products (Chapman 2013, p. 103). The food industry is one of the most dynamic markets. This is due to a plethora of emerging trends which often require any player in the sector to consider the introduction of different measures aimed at maintain a physical presence in the face of these changes. The decision by Tate & Lyle to invest in Central Asia risks the possibility of failing to identify the prevailing consumer trends and invent ways by which these consumers can be provided with products and services that satisfy their needs (Tate & Lyle 2012, p. 2). The emerging dietary trends are not only inspired by changes in lifestyle but also cultural and religious background. Failure by the company to recognize the plurality of cultural and religious orientations in Uzbekistan and Kazakhstan could impact on the performance and reputation of the company in relation to its ability to engage in production and supply of products that are in agreements with the demands of the target customers (Chapman 2013, p. 103). Tate & Lyle is a multinational corporation which thrives on its ability to provide essential food products to target customers. For the company to experience high levels of success it is expected to derive majority of its personnel from the local community (Tate & Lyle 2012, p. 2). The risk in its decision to invest in Central Asia is not in the personnel but in failure by the company to attract and retain the most effective and highly qualified workforce from the local communities. Inasmuch as the company may acquire positive reputation by embracing personnel in the local community, there is need to ensure that the personnel hired are highly knowledgeable and skilled in matters related to the operations of the company. Failure to identify these necessities will result in inadequate skills in terms of the personnel hence affecting the overall performance of the company (Chapman 2013, p. 90). Commercial success of the company is partially dependent on its ability to obtain and retain all the protection rights including patents for specific technology and products. The patent laws in Kazakhstan and Uzbekistan are relatively weak at this means that in such environments the company may fail to protect its intellectual property and this is a disadvantage to the company in terms of its ability to produce and supply high quality and relatively unique products to the target customers (Tate & Lyle 2012, p. 2). The existence of such laws also increases the possibility that the company will fail in its bid to encourage innovations among different stakeholders and this may deprive it of the ability to develop and maintain a competitive advantage in the market (Tate & Lyle 2012, p. 2). Risk management There is need for the company through the Board to engage in an annual review of its safety and environmental performance policies in different countries and regions such as central Asia. This can also be ensured by dedicating health and safety polices in all facilities to the staff in ways that are embedded with measurable standards (Spedding & Adam 2008, p. 122). This will help the company, through specific indicators to understand its role in matters of corporate policy responsibility and amend its policies in accordance with the prevailing laws and policies in different countries (Blowfield 2012, p. 362). Adverse environmental conditions in Central Asia have been considered as an impediment towards growing speciality food products for Tate & Lyle to supply. To mitigate this risk, the company through its team of innovators is in the process of scouting for technological breakthrough and identifying opportunities across industries on the best scientific approaches that can be used in the development of environmentally sustainable initiatives (Spedding & Adam 2008, p. 126). Furthermore, the company has been able to begin this process by recruiting new staff and engaging exiting staff in professional development initiatives to upgrade their skills particularly on how to improve production and service in harsh environmental conditions. Furthermore, the company must also create policy agreements with governments and companies in different countries to help in supply of raw materials to plants where there is insufficient supply of the essential food ingredients. There is need for the company through the governments of the selected countries in Central Asia to be engaged in a process of developing energy and raw materials purchasing policies as a way of providing security for supplies (Chapman 2013, p. 100). In terms of identify important consumer trends the company through its board has the responsibility developing innovative and commercial development teams that will work closely with customers and company advisors to ensure easy identification of emerging trends in the market (Spedding & Adam 2008, p. 127). The company can also ensure the development of these polices through the process of recruiting and training its staff on polices that strengthen and update their skills on consumer interaction and engagement. It is through these engagements that the company will become a customer focused business. This will not only help in maintaining high standards of customer service but also in ensuring that the products are trendy and in accordance with the demands of the customers. In matters of identifying and retain personnel within the company, it is the responsibility of the board through the management to develop remuneration policies which are designed to attract and retain employees in the company. The process of developing these police will require that the company understands the minimum wage in the Central Asian market and develop remuneration packages that act as a competitive advantage. In addition the company can also engage in the development of a talent strategy. This will be essential in providing the employees with a platform of developing their careers (Spedding & Adam 2008, p. 132). Conclusions Tate & Lyle prides itself as one that is dedicated towards the management through effective governance and good management practices. The company’s governance statement has states its objectives by asserting that the shareholders, as the owners of the company, have the right access information related to the company and to be inquisitive on possible strategies that the company is developing to ensure that the shareholders are satisfied with the direction chosen by the company. The company through its board of directors operates on the understanding that it is exposed to numerous risks which when they fail to manage, can have adverse effects on the reputation, financial performance and operation of the company in Central Asia. Maintaining high levels of safety standards, recruiting qualified employees, developing better remuneration and the development of a consumer oriented approach through sustainable government policies have been considered as the best ways of managing the impending risks in the Central Asian market. 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