Financial Risk Management

Large systems at the core of even the biggest, and most successful, businesses sometimes need upgrade projects fraught with risk. When global consumer products company Proctor & Gamble, identified the need to enhance its nearly 20-year-old ordering, shipping and billing software and work processes, they knew they had to identify, mitigate and manage any and all risks involved with implementing the new system. The project was one of the largest in the company's history, and carried great risk along with the potential for big benefits.

Proctor & Gambles IT system serves the very heart of P&G's US$84 billion business. Covering North America, Europe and 150-plus export markets, the project would directly impact a diverse portfolio of 250,000 products that includes everything from laundry detergent to pharmaceuticals to snacks. In a single day, the IT system typically juggles 18,000 orders shipped to 150,000 retailers on 8,000 trucks; accounting for US$200 million in revenue. Any glitch would generate unwanted attention and potentially mean a hit to the bottom line.

The P&G project was launched in 2009 with two driving goals: to collect and respond to feedback in real time and thereby create more compelling promotions and increase sales, and to identify the best ordering, billing and shipping processes for shipping products to target locations.

To ensure the revamp would align with those business goals, P&G's global business services group created a project charter that included a business case, project assets, enterprise environmental factors, and a summary milestone schedule and budget. The team also created a project statement of work that outlined the business needs and scope description.
Proctor & Gamble then conducted a detailed risk identification and analysis process which identified three major project risks. To mitigate and manage those risks, P&G introduced a number of Risk Management processes throughout the life of the project. Through effective communication and procedures, the damaging effects can be decreased. P&G set up system to accept, analyse and amend the changes required, while expanding the business and focusing on the scope.

Thanks to their successful Risk Management approach Proctor & Gamble were able to mitigate the risks successfully with zero impact on the day-to-day operations of their business or retailers. Furthermore, shipping times and customer satisfaction improved with the new system.

Tutorial Discussion Points:

1. Explain how Proctor & Gamble identified the risks they faced in implementing the new IT system. Detail the techniques they employed and the risks that they identified.

2. Use examples of Risk Management tools to explain how Proctor & Gamble and explain how these tools may have been advantageous to Proctor & Gamble in their Risk Management approach

3. The case identifies scope as a risk that could take the project off of track. Explain why increased scope would be a risk to Proctor & Gamble and how they helped to monitor, identify and control scope changes.