Pepsi Refresh Project Risk Management Scenario Scenario Background Company: Peps
ID: 423638 • Letter: P
Question
Pepsi Refresh Project Risk Management Scenario
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 programrisk 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::::
Consider the most effective usage of both qualitative and quantitative risk assessments methods as applied to the provided Pepsi Refresh Project. Consider the parameters of the Pepsi Refresh Project (the 2011 1-year pilot of the project). Once project risks have been identified, the project team must analyze them to try to determine the likelihood (probability) of occurrence and the effect to the project (impact) should a given risk event occur. All risk analysis begins with qualitative analysis. To ensure accuracy and completeness, the project team should study both the risk event itself and the interactions between risk events. Explain how risk measurement scales will be developed. Will you use a standard organizational set of measurements or define your own? Explain how risks will be prioritized based on the defined qualitative measurement scales. Document risk measurement scales and their meaning in the project risk register in Columns H–J. For example: What does a “2” mean for probability? Is that 20% or 20–40%? What does a “4” mean for impact? Is that “project fails to meet one objective” or “project exceeds budget or timeline by 20%”? please answer using both qualitative and quantitative examples.
A
B
C
D
E
F
G
H
I
J
Risk No.
Risk Name
Risk Event Description
Risk Impact Description
Risk Type
Risk Source
Impact Score
1-5
Prob. Score
1-5
Risk Factor
P*l
1
Social Media
Unable to connect with All customer base via Social Media
Loss of traditional Market and customer base
Technical
Customers
2
Social Media
Unable to connect with younger generation via social media
Will be difficult to promote a sugary beverage to the younger generation when we are In a world of “Fit”
Technical
Younger generation customers
3
Social Media
Unable to connect will older generation customer due to not using social media
Loss of older generation customers
Technical
Older generation customers
4
Management
Risk of losing Job
Spend Money but no campaign unsuccessful
Management
Revenue
5
Management
Making sure management picks the correct teams to be successful
Teams that are picked are unsuccessful
Management
Unsuccessful campaign
6
Marketing
Unable to sign new endorsement contracts
Decreased popularity
Commercial
Customers
7
Marketing
Losing contracts with Pop figures due to decrease in popularity
Loss of popularity
Commercial
Customers
8
Competition
Push back from competitors with a better campaign
Loss of customers
External
Competition
A
B
C
D
E
F
G
H
I
J
Risk No.
Risk Name
Risk Event Description
Risk Impact Description
Risk Type
Risk Source
Impact Score
1-5
Prob. Score
1-5
Risk Factor
P*l
1
Social Media
Unable to connect with All customer base via Social Media
Loss of traditional Market and customer base
Technical
Customers
2
Social Media
Unable to connect with younger generation via social media
Will be difficult to promote a sugary beverage to the younger generation when we are In a world of “Fit”
Technical
Younger generation customers
3
Social Media
Unable to connect will older generation customer due to not using social media
Loss of older generation customers
Technical
Older generation customers
4
Management
Risk of losing Job
Spend Money but no campaign unsuccessful
Management
Revenue
5
Management
Making sure management picks the correct teams to be successful
Teams that are picked are unsuccessful
Management
Unsuccessful campaign
6
Marketing
Unable to sign new endorsement contracts
Decreased popularity
Commercial
Customers
7
Marketing
Losing contracts with Pop figures due to decrease in popularity
Loss of popularity
Commercial
Customers
8
Competition
Push back from competitors with a better campaign
Loss of customers
External
Competition
Explanation / Answer
Ans. We will use a standard organizational set of measurements.
High risks will be given to those which directly affect the target audience.
Impact Score distribution: 1 refers to project fails to meet one objective (Less the impact score, less the risk involved) & 5 refers to project fails to meet 5 objectives (more the impact score, more the risk involved)
Probability Score distribution: 1 refers to one risk will appear in 'n' cases (Less the probability score, less the risk involved) ( here 'n' is fixed no. of trials) & 5 refers to five risks will appear in 'n' cases (More the probability score, more the risk involved)
Risk Factor: P*I will give you the amount of risk involved in the risk. 1 refers to a very low amount of risk & 25 refers to a very high amount of risk involved.
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