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hoW Can The monITorIng and ConTrol proCess aTTempT To ConTrol rIsKs? 355
Mitigation strategies

Not all events can be avoided, but an operation can try to separate an event from its
negative consequences. This is called mitigation. For example, look at the way that
an operation deals with exposure to currency fluctuations. After the collapse of com-
munism in the early 1990s, a multinational consumer goods firm began to invest in
the former Soviet Union. Its Russian subsidiary sourced nearly all products from its
parents’ factories in Germany. Conscious of the potential volatility of the rouble, the
firm needed to minimise its exposure to a devaluation of the currency. Any such devalu-
ation would leave the firm’s cost structure at a serious disadvantage and without any
real option but to increase its prices. Financial tools were available to mitigate currency
exposure. Most of these allowed the operation to reduce the risk of currency fluctua-
tions but involved an ‘up front’ cost. Alternatively, the company could restructure its
operations strategy in order to mitigate its currency risk, developing its own production
facilities within Russia. This may reduce, or even eliminate, the currency risk, although
it would probably introduce other risks. A further option was to form supply partner-
ships with other Russian companies. Again, this would not eliminate risks but could
shift them to ones that the company feels more able to control.

Recovery strategies
Recovery strategies can involve a wide range of activities. They include the (micro)
recovery steps necessary to minimise an individual customer’s dissatisfaction. This
might include apologising, refunding monies, reworking a product or service, or pro-
viding compensation. At the same time, operations have to be prepared for the (macro)
major crises that might necessitate a complete product recall or abandonment of ser-
vice. The question that an operations strategy needs to consider is, ‘At what point do
we reach the limit of avoidance and mitigation strategies before we start to rely on
recovery strategies?’

example planning for recovery 7

It was a product recall that attracted more-than-usual negative media coverage. Cadbury’s, the
confectionary manufacturer, recalled seven product lines accounting for more than a million
chocolate bars. This was the result of potential salmonella contamination caused by a leaking
pipe in a production factory. Initially, a decision was taken not to recall any products, but this
was reversed later. According to Chris Woodcock, managing director of Razor, a risk assess-
ment firm:
‘… this is a classic case of a business needing to consider all the reputational and brand-protection
aspects of a possible food safety, technical problem before deciding whether or not to recall. The logi-
cal, technical facts are often not enough on their own to influence a decision on recall or no-recall. It
is also vital to assess emotional and brand associations’.
Where a brand is trusted to the extent of Cadbury’s, recovery planning is vital. In this case the
scientific justification for a recall was considered when it was first discovered that the pipe leak-
ing had caused the low levels of salmonella. ‘There was possibly still a good case for reconsidering the
longer-term brand damage should the no-recall decision subsequently escape into the public domain. It
was the apparent lack of transparency that attracted most criticism in media and expert commentary.’
But the Cadbury’s incident is far from being an isolated case. The number of product recalls

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