Mcdonalds Risk And
Risk Management
COMPANY BACKGROUND
McDonalds
• American Fastfood Company founded in 1940
• Started only as a hamburger restaurant
• Arrives in the Philppines in 1981, introduced by
Mr. George T. Yang
• In 2005, it became 100$ Filipino owned
It operates according to four values which are:
quality, service, convenience and value
Financial Risk
• Financial risk is that a company will not have
sufficient cash flow to meet financial obligations.
• financial risk is the additional risk a shareholder
bears when a company uses debt in addition to
equity financing. Companies that issue more debt
instruments would have higher financial risk than
companies financed mostly or entirely by equity.
• financial risk is an
umbrella term for
multiple types of
risk associated
with financing
Types of Financial Risk
McDonalds Faced
Legal Risk
•Operating in developed markets like the U.S. and Europe,
McDonalds faces tighter regulations. Some regulatory
changes include printing nutritional content on items,
product packaging, taxation, and marketing to the
children. This could translate into higher costs of
compliance.
How McDonalds
handle the risk?
fulfill nutritional criteria for items
advertised.
Committment of serving consumers
Market Risk
•the risk to an organization resulting from movements in
market prices, in particular, changes in interest rates,
foreign exchange rates, and equity and commodity
Hereprices.
are the most pressing challenges he faces.
1. Win back customers who have fallen out of
love with McDonalds
2. Take on Burger King for low-income
customers
3. Tackle the bad PR by paying staff more
4. Sort out China, where it has been rocked by
food safety scandals
[Link] down the menu
Currency Risk
additional variability experienced by a multinational
corporation in its worldwide consolidated earnings that
results from unexpected currency fluctuations
Once a company becomes involved in an international trade,
it consequently becomes subject to foreign exchange risk
exposure.
How McDonalds
handle the risk?
• can be mitigated through various
hedging instruments.
• McDonald’s warned their investors
of the potential changes
• adjusting prices to reflect changes
resulting from fluctuation
• Mcdo financial group-hedging BS and
IS
Operational Risk
▪The risk of a change in value caused by the fact
that actual llosses, incurred for inadequate or failed
internal process, people and systems, or from
external events (legal risk), differ from the expected
losses.
Several labor strikes and protest against
McDonalds by its workforce relating matters such
as increasing minimum hourly wages and the
right to unionize.
How McDonalds
handle the risk?
Reputation Risk
Typically associated with reputation risks include ethics,
safety, security , sustainability,quality and innovation.
This risk can be informational in nature that may be
difficult to realize financially.
There have been several studies and some
criticismsurrounding mcdonalds:
•food quality
•treatment of employees
¤all of these contribute changes in consumers
perception of McDonalds and the food it serves.
How
Failure to keep up with consumers McDonalds
demand
handle the risk?
Highlight Corporate Social
Responsibility
Enriching their brand name
by initiating good publicity