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Sally Holton felt she had walked into a hornet's nest in her new position as CFO of Blue Wood Chocolates. The business was underperforming, and urgent action was required to respond to pressure from the banks and provide an action plan to the board of directors. There was disagreement among senior executives and board members about the strategy and overall objectives the company should pursue, and nobody had a grasp of all major risk factors. There was no oversight of the hedging practices and little effective internal communication among various functions, or even within some of the functions.

Sally needed to have an overall view of the corporate objectives before developing and implementing specific operating procedures. She needed to get a grasp on the major risks facing the company so that she could develop appropriate responses to these risks. An ERM framework seemed appropriate. However, this would need buy-in from the top, specifically the CEO, chairman, and the board. She needed to develop an overarching proposal incorporating objectives, strategy, and an ERM outline framework for presentation to the board. She would first need to get the CEO on board, not an easy task given his disinterest in what he considers bureaucratic matters that he hires people like Sally to deal with. The CEO's domination by his father, the chairman, would also likely be an obstacle.

Operational procedures, including commodity and currency hedging, would be important but would need to be developed within an overall ERM framework. It was time for Sally to get to work. She also needed to determine how financial performance could be improved. Profitability seemed lackluster, with a high expense base and no real control on major purchasing inputs. Revenues had held up fairly well but could be under competitive threat if margins continued to fall below the industry average.

Overhanging all other issues was the debt maturity profile. Both the senior notes and the bank term loan had maturity dates falling in mid-2014. No planning or discussion had taken place about how to repay and/or refinance these facilities, and the banks were already indicating dissatisfaction with Blue Wood.

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