Kellogg’s Risk Assessment Essay

umteen inventions atomic number 18 discovered by accident and that is the case of Kelloggs. In 1898, W.K Kellogg and his chum Dr. John Harvey Kellogg attempted at making granola and fai direct but their failure led to flaked corn which then became Kelloggs Corn Flakes. Kelloggs Company engages in the manufacture and marketing of ready-to-eat cereal and convenience foods. The come withs conquest is due to the continuous improvement in the product line to reconcile to changes in consumers taste.The partnerships purpose is to do more than app bently offer products beneficial to the consumers. The confederation is always seeking ideas to improve the guests experience of consuming the product through with(predicate) the packaging, graphics, and labels. Kelloggs spate is to enrich and offer products that are more environment tout ensembley friendly and fulfil the world through foods that matter. Kelloggs activities in the United States are area to regulations. Some of the gove rnment agencies that regulate Kelloggs include the Food and drug Administration, Federal Trade Commission and the Departments of Agriculture, Commerce and Labor. The companys facilities are subject to various U.S. and foreign, federal, state, and local laws and regulations regarding the release of material into the environment and the defense of the environment in other ways.Kelloggs has an Emerging Issues Team that helps defy their Executive Leadership Team up-to-date of evolving health, nutrition and food galosh issues that could potentially impact the consumers and business. In addition, the Crisis Incident steering Team evaluates and manages incidents that rump suck in a high impact on the business such as natural disasters, product recalls and health epidemics. Kelloggs has a affable Responsibility and Public Policy Committee whose duty is to oversee all aspects of their corporate responsibility approach. The audit Committee is composed of four non- trouble Directors a nd they have-to doe with with counseling, privileged auditors, and the independent registered public accounting firm to review accounting, internal control, auditing and financial reporting matters.To help prevent fraud and other wrong practices, the board and senior management set the tone at the conduct. It is important for the company to have a corporate culture that promotes good conduct. Kelloggs has an smirch of Ethics and Business Conduct that clarifies company indemnity or reporting issues related to ethics and business conduct. The Ethics Office provides online training and basic information on legal and regulatory requirements, policies and standards of the world-wide Code of Ethics.Each year the employees are given a questionnaire that asks close information of relationships or activities that may lead to a conflict of take and round any known violation of policies or practices. The ethics topographic point support the internal controls that are put into plac e to ensure employees ensue the personal and professional standards. The internal audit program evaluates the appropriateness and dominance of these internal controls. In order to have a better perceptiveness of the companys financials, the ratios give an insight as to how the company is doing compared to the industry.The topical ratio can give a sense of the efficiency of a companys run cycle or its ability to construction its product into cash. Kelloggs current ratio of .7 compared to the industry ratio of 1.2 suggests that the company would be uneffective to pay off its obligations if they came due at that point. Companies that have trouble getting paid on their receivables or have ample inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. When comparing Kelloggs return on assets ratio of 8 to the industrys ratio of 10.8, we see that Kelloggs is not universe too effective in converting money it has to invest into net income.Management needs to build clever choices in allocating its resources so that they can make a large profit with little investment. As for the companys inventory turnover of 6.8 compared to the industry average of 2.9, the ratio shows that Kelloggs has greater sales efficiency and a lower risk of loss through un-saleable stock(a). Kellogg faces a potential risk with their long debt. Kelloggs long debt to lawfulness ratio of 2.49 compared to the industrys average of .68 indicates that the company has been aggressive in financing its growth with debt.This can result in unstable pelf as a result of the additional interest expense if the company cannot maintain lower interest rates on their long-term debt. The long-term debt from 2010 went from 4,908 million to 5,037 million in 2011. On February 15, 2012 Kelloggs entered into an agreement to teach Pringles, owned by Procter & Gambles, for $2.695 billion. The purchase comes with some risks for Kelloggs shareholders since the act is intended to be funded by international cash and issuance of close to $2 billion of short and long-term debt. The companys dodge to pay down the debt requires limiting share repurchases to employee option exercises for the next deuce years.To ensure that the employees provide long-term performance, the company uses stock-based compensation, including stock options, restricted stock and executive performance shares. When comparing the operating profit from 2010 of $1,990 million to 2011 operating profit of $1,976 million, there is a decline which was negatively impacted by the supply chain investments and reestablishment of the incentive compensation program as a result of the companys strong pay-for-performance orientation. The table below shows the $6.4 million increase in key executive compensation from 2010 to 2011. The increase is in the main due to salary increase and restricted stock award and securities options increase. The management compensation plan that is tied to profit results may cause management to provide erroneous numbers.It seems today everyone is going green and therefore consumers are paying close attention to how their food is made and where it is sourced. With that in mind, Kelloggs has begun to use only sustainably grown palm oil in Europe. The company has invested in Green Pal sustainable palm oil certificates to sanction the expansion of more responsible palm oil farms. Kelloggs faces a challenge in addressing the growing concern against destructive agricultural practices that has fright many companies into ensuring their ingredients are environmentally friendly.Kelloggs faces growing urgency as more consumers shy away from products containing palm oil if they cannot verify the source. Kelloggs has to keep up with the green mentality and do what it takes to educate their consumers about their environmentally friendly products. In conclusion, Kelloggs appears to be an acceptable client. there are several areas of the compa ny that require attention for example the long-term debt and the acquisition of Pringles. Also, going green is an issue that can be repugn to the company since they have to address the concern against destructive agricultural practices. Overall, I look forward to working with Kellogg Company and being of assistance.WORKS CITEDKaye, Leon. Kelloggs Commits to Sustainable Agriculture and Water Stewardship. 24 April 2012. 18 Jan. 2013. http//www.triplepundit.com/2012/04/kelloggs-sustainable- agriculture-water-stewardship-2011-corporate-responsibility-report/. Kellogg Company DailyFinance. 17 Jan. 2013.Kellogg Company. Morningstar. 18 Jan. 2013. Kelloggs. 2012. 18 Jan. 2013