Food companies ignoring modern day risks, says report
Food companies are not doing enough to manage the ‘real’ threats facing their businesses as the industry’s risk profile changes, according to a new report.
Risk management consultant and insurance broker Aon claimed its 2005 survey of food companies in the FTSE 250 revealed a growing gap between the risks that are most likely to damage a food company’s viability and the measures companies take to protect themselves.
The firm said companies tend to focus on the risks they are familiar with, like employer’s liability, often overlooking new risks such as climate change and supply chain issues.
“The only way a food company can prosper is through ensuring its goods are on the shelves for customers,” said Peter Jackson, md of Aon Risk Services consumer products group. “But companies aren’t recognising this. They need to turn their attention to the real risks threatening the viability of the business.”
Despite the highly publicised Sudan 1 scare in 2005 and a 175% increase in product recalls since the European Union’s product safety directive was adopted in the UK, companies are still not taking enough care over the ingredients they source from around the world, claimed Aon.
Instead, they tend to focus on safety and cleanliness within their own factories and often fail to ensure product recall insurance covers imported products.
And not enough is being done to manage the real danger within product recalls -supply chain interruption while the problem is being fixed, claimed Aon.
According to the Aon, companies should also focus more on the impact climate change could have on sales. It said modern sophisticated weather insurance enabled companies to focus on some of the more prominent weather risks and protect themselves accordingly - like the floods affecting Spanish orange production.
A more holistic approach to monitoring and analysing risk is needed, which Aon said could incorporate captive insurance companies that use the re-insurance market to lay off the biggest risks, thus keeping most of the cash within the business.
