Scenario Background Company: Pepsi Pepsi’s Product Portfolio Fun for you Better
ID: 350538 • Letter: S
Question
Scenario Background
Company:
Pepsi
Pepsi’s Product Portfolio
Fun for you
Better for you
Good for you
Pepsi’s Target Markets
Millennial
Generation X
Baby Boomer
Internal Environment
Board of Directors
Risk management director at board level
Multiple levels of corporate management
Chief risk officer at corporate management level
Multiple divisions
Multiple management levels within divisions
Executive risk manager at divisional level
Wholly owned subsidiaries
Multiple divisions within subsidiaries
Multiple management levels within divisions
External Environment
Bottling companies
Distributors
Point of sale locations
Community relations
Strategic alliances
Competitors
Risk Environment
Appetite
High degree of risk acceptance for marketing programs
High degree of risk acceptance related to return on investment timeline
Moderate degree of risk acceptance for distinction between lines on product portfolio
Low degree of risk acceptance regarding company reputation
Tolerance
High tolerance for risks related to relations with bottlers and distributors
Moderate tolerance for community relations
Low tolerance for risks related to brand image
Threshold
Defined by risk policies and procedures at the corporate and division levels
Scenario
Pepsi has concluded that continuing the Pepsi Refresh Program will, in fact, be profitable in the medium-term and is worth the investment outlined in the board’s subcommittee report. The board has directed the company executives to execute a pilot that will roll out the redesigned program for a period of 1 year. After 1 year, the board will analyze the results and make a determination on continuing, tweaking, or halting altogether the program.
The initial plan was to reduce focus on social media and focus more on traditional and sports marketing vehicles; however, the board received an industry report that shows companies are realizing increased revenue through increases in earned media value, and companies increase earned media value by combining traditional marketing vehicles with social media. Pepsi will increase focus on this one area during this 1-year pilot. The chief executive officer (CEO) assigned a program manager to implement the redesigned Pepsi Refresh Program and a project manager to focus on the combination of traditional marketing vehicles and social media.
The project manager assembled a project team with a project risk management professional (RMP) to manage project risks. The RMP will develop a project risk management plan that will integrate with the program risk management plan of the pilot program. The risk management plan will define procedures to identify risks throughout the phases of the project. The plan will lay out the major categories of risks associated with the project, how each category will affect the project's stakeholders, and how stakeholders will be engaged in the risk management process.
The risk management framework, detailed in the strategic plan, will serve as the foundation for the risk management plan employing corporate and division policies and procedures to manage risks to the project schedule, budget, and scope. The RMP will detail the risks to organizational assets and outline the environmental factors that the program and project managers should consider as they plan, execute, and monitor the project. Risk impacts and probability scales must show alignment with the organization’s risk appetite and tolerance and must set thresholds used to manage monitoring and response strategies. These strategies must allow for responses leveraging both external factors and relationships and internal corporate and divisional resources.
QUESTION:
Describe the purpose of the project risk management plan.
Explanation / Answer
Risk management plans, when created efficiently, allows a company to essentially identify their strong and weak points, risks associated with the dealings and details about the threats as well as the strengths of the project. It also allows a company to deal with situations which are unprecedented in nature and therefore essentially allow them to be able to respond to such situations effectively. This ensures that a company has lower risks which are a good thing for any business whether it is a big corporation. Therefore, even in the case of Pepsi, it will allow them to be able to lower their risks and mitigate damages, failure and negative impacts that can be put on their business. This requires careful coordination between the different management and departments of the company and usually involves the integration of HR department into strategic management department. It also requires complete oversight by the business departments in their respective roles and thus creates an efficient system which allows the company to overcome challenges and shortcoming in a product or a project efficiently.
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