1.
Policymaking is one of the critical issues in every situation. Policymakers are expected to deal responsibly with risk and uncertainty. Irresponsible handling of the issue leads to wrong decision making. Policymaker’s attitude towards uncertainty and risks affect the debate on climate change. The attitude towards uncertainty and risk has guided the policymakers in decision making. In fact, policymaker streamlines their decision are based on cost and benefits, equity, sustainability, and economic development. Also, attitudes towards risk have made the policymakers focus on a balance between efficient and sufficient global emissions reduction system. The uncertainty is addressed to achieve emission reduction path. The debate on climate change has been streamlined towards the outcomes.
2.
According to the annual report, there are various business risk concerns in 2014 that PepsiCo is facing. One of the main business risks is the change in demand. The demand for the products could adversely be affected by the change in consumer preference. The risk is enhanced by the fact that the business sector is very competitive. Also, changes in the regulatory and legal environment is a business risk faced by PepsiCo. This is because it increases operating costs, limits business activities, as well as reducing the demand for PepsiCo products (PepsiCo). Taxation and tax policy are a critical business risk because it is associated with various liabilities. Tax liabilities affect the business adversely. The company also faces shortages in supply of raw materials, which adversely affect the financial condition of the company. This is because most of the raw materials used by the company are sourced from various countries experiencing political instability, civil unrest, as well as unfavorable economic situation.
3.
The business risk faced by PepsiCo is caused by foreign exchange, interest rates and change in commodity prices. The company manages foreign exchange risk by identifying and measuring the company’s foreign exchange exposure. The tool used include sourcing the purchases from the local suppliers. This is carried out by negotiating with suppliers using the local currency (PepsiCo). The company uses future and forward contracts. Also, PepsiCo handles commodity prices through sourcing initiatives and hedging strategies. The company manages the interest rates through swap locks, treasury locks, as well as cross-currency interest rate swaps.
Reference
PepsiCo. 5 Years and Growing. PepsiCo 2014 Annual Reports. Retrieved from http://www.pepsicoindia.co.in/Download/pepsico-2014-annual-report_final.pdf
