Church & Dwight CHD Business Risk Report

I. Financial Risks

A. Fluctuating raw material costs: Church & Dwight faces risks associated with the fluctuating costs of raw materials essential for manufacturing its products. Increases in prices of these materials can negatively impact the company’s profitability and overall financial performance.

B. Foreign exchange rate exposure: As an international entity, Church & Dwight is exposed to foreign exchange rate fluctuations, which can affect the conversion of overseas revenues into U.S. dollars, potentially impacting financial results.

C. Increasing interest rates: Rising interest rates could increase the cost of financing for Church & Dwight. Given the company’s use of borrowing to finance operations and investments, higher interest rates could lead to increased financial costs.

II. Operational Risks

A. Supply chain disruptions: Church & Dwight could experience disruptions in its supply chain due to factors such as natural disasters, global pandemics, or political instability in countries from where it sources materials.

B. Product quality control issues: Maintaining high standards of quality control is crucial for Church & Dwight. Any lapse in these standards could lead to product recalls or damage to brand reputation.

C. Disruption in distribution channels: Church & Dwight relies heavily on a variety of distribution channels. Disruptions in these channels, such as logistic failures or retailer insolvencies, could impair the company’s ability to deliver products to consumers efficiently.

III. Regulatory and Legal Risks

A. Compliance with changing regulations in different markets: Church & Dwight must adhere to numerous regulatory requirements, which vary across the many markets the company operates in. Changes in such regulations could impose additional compliance costs or restrict company operations.

B. Product liability claims: The company is exposed to potential product liability claims could disputes arise regarding the safety or efficacy of its products, which could result in significant financial liabilities and affect its public image.

C. Intellectual property protection challenges: Protecting intellectual property, including trademarks and patents, is paramount for Church & Dwight. Failure to adequately protect these assets could lead to competitive disadvantages and loss of revenue.

IV. Strategic Risks

A. Intense competition in the consumer goods industry: Church & Dwight operates in a highly competitive industry, where it regularly competes with larger companies having more resources, which could impact its market share and profitability.

B. Dependence on key retailers for distribution: The company’s reliance on major retailers like Walmart and Target for the distribution of its products poses a risk if these relationships are altered or terminated.

C. Product innovation and development challenges: Continuous innovation is critical in the consumer goods sector. Failure to innovate effectively could lead the company to fall behind its competitors.

V. Reputational Risks

A. Social media backlash: Negative publicity on social media platforms can quickly damage Church & Dwight’s brand reputation and influence consumer perception about its products.

B. Public relations crises: Handling public relations crises improperly can lead to lasting brand damage, impacting customer loyalty and corporate value.

C. Environmental sustainability and corporate social responsibility concerns: As public concern over environmental impact grows, Church & Dwight’s commitment to sustainability and corporate social responsibility becomes increasingly important to maintain a positive company image.

VI. IT and Cyber Risks

A. Data breaches and cybersecurity threats: Church & Dwight is at risk of data breaches which could compromise sensitive corporate information and consumer data, leading to financial loss and loss of consumer trust.

B. IT system failures impacting operations: Dependence on IT systems means that failures can disrupt operations significantly, potentially leading to operational delays and financial losses.

C. Compliance with data protection regulations: As data protection laws evolve, Church & Dwight must continuously update its policies and systems to remain compliant, preventing legal penalties and damage to its reputation.

VII. Risk Mitigation Strategies

A. Diversification of suppliers and hedging strategies for raw materials: To mitigate the impact of fluctuating raw material costs, Church & Dwight employs diversification of suppliers and uses hedging strategies to stabilize prices.

B. Implementing effective quality control measures and supply chain resilience: The company focuses on stringent quality control measures and boosts supply chain resilience to minimize disruptions and maintain product standards.

C. Regular legal compliance audits and proactive legal risk management: To navigate regulatory complexities, Church & Dwight conducts regular compliance audits and practices proactive legal risk management.

D. Continuous monitoring of industry trends and competitive landscape: Staying informed about industry trends and the competitive landscape helps Church & Dwight adapt its strategies effectively.

E. Strengthening cybersecurity measures and investing in IT infrastructure: The company invests in strong cybersecurity measures and robust IT infrastructure to safeguard against digital threats and ensure reliable operations.

F. Developing robust crisis management and communication plans: Church & Dwight implements comprehensive crisis management and communication plans to handle potential public relations crises efficiently and effectively.

G. Enhancing transparency and engagement on environmental and social initiatives: The company strives to be transparent regarding its environmental and social initiatives, engaging stakeholders and building trust.