Coty's case

Risk Exposure	Risk Limits
	Likelihood	Company Value Change	Risk #1 MUST NOT HAVE ANY SINGLE RISK SCENARIO OF LIKELIHOOD GREATER THAN OR EQUAL  TO 10% THAT RESULTS IN A DECREASE IN COMPANY VALUE OF MORE THAN 10% (current: 17.4%)
Risk 1 Scenario 1 (Worst Case Scenario)	15%	-17.4%
Risk Appetite	THE LIKELIHOOD OF ACHIEVING OR EXCEEDING STRATEGIC PLAN BASELINE  COMPANY VALUE MUST BE GREATER THAN OR EQUAL TO 40% (current: 25.9%)

Examples here:

Mitigation 1 of Risk 1: Hire a professional and experienced marketing team

In order to mitigate the adverse influence of Risk 1, it is significant for Coty to successfully relaunch both product lines. In the worst case, Coty and brand management would be misaligned in key product development initiatives, leading to issues in both product formulas and direct to consumer (DTC) market distribution. To decrease the likelihood and the financial impact of the worst scenario, Coty should hire a professional and experienced marketing team in the industry of cosmetics, who can develop strategic relationships with Key Opinion Leaders (KOLs) on several social media platforms, like YouTube, Instagram, and Facebook. The hirement contract can be five years long since the second scenario mentioned the resolution in the next five years. The team will take responsibility for risk monitoring as well. Basically, the team will review the financial report with the designated baseline, and if the trend starts to converge with the worst scenario, the team should message the brand management team to adjust distribution and alignment.  Besides, the marketing team with strong relationships with KOLs can effectively prevent both product lines from losing their celebrity names and reputation. According to the report from Common Thread Collective, the effect of advertisement on social media is significant. 

Costs

Coty is expected to spend about $X million for the mitigation. According to a statistical database, the annual salary for a top level cosmetic marketing staff is $89,500, and for a 75th percentile staff is $58,000. Considering the original marketing team Coty contains, we suggest that the new experienced marketing team consist of 12 marketing staff, with four top level and eight 75th percentile staff. In this case, a top level marketing staff and two 75th percentile staff can take care of each segment. The total salary expense would be $820,000. Combined with consideration of budget, the total expense of mitigation in the first 5 year would be $1,000,000. 

Results

With the mitigation, Coty is expected to decrease the likelihood of the worst scenario to 5~8%. Correlated, the likelihood of the moderate scenario would be about 35~40%. Moreover, the likelihood of the upside scenario is aimed to reach about 15%.  With the help of the excellent marketing team, Coty will monitor the risk by reviewing the financial report with the help of our designed baseline model. By looking at the trend of business, Coty would experience the original adverse influence of the worst scenario in the first 2 years, and then the team will figure out that the company is in the worst scenario and adjust the situation with resolution toward the moderate scenario in year 3.

In the Americas segment, luxury/prestige cosmetics prices for all sales modalities are 7% lower than baseline in years 3 through 5. In the EMEA segment, prestige cosmetics sales volume for in store sales is 1.5% lower than baseline for year 1 and year 2, falling linearly to 6% below baseline in years 3, 3% lower than baseline in year 4, and 1.5% lower than baseline in year 5. Online sales store volume is 3% lower than baseline in year 1, falling linearly to 12% below baseline in year 2, falling  9% lower than baseline in year 3, failing 6% lower than baseline in year 4, and 3% lower than baseline in year 5. In the EMEA segment, luxury/prestige cosmetics prices for all sales modalities are 4% lower than baseline in years 3 through 5.