Nestlé cuts crisis costs by taking risk management to shop floor

Global food giant Nestlé is concentrating its efforts on business continuity planning rather than using expensive interruption insurance to reduce its exposure to the costs of crisis management.

According to Nestlé UK business continuity manager David Hulme, 90% of crisis management was to do with risk identification and mitigation - avoiding situations before they get out of control. The rest was all about business recovery.

Hulme said insurance was one way of reducing losses from assets and materials, but, he said: "We don't have business interruption insurance, it's just too bloody expensive. In the UK we stand the cost - up to £10m - ourselves."

Small fires in baking ovens had been a long-standing issue for the company, he added. However, it had now reduced 360 fires a year to under 30.

"It's still pretty horrendous, but a lot better than it was," said Hulme. The improvement, he added, was not achieved by installing sprinkler systems, but by working with people on the shopfloor to deal with problems before they escalated into a fire.

He used the example of a blaze at a new Nestlé distribution centre in Brazil to illustrate his point. Here, a short-circuit in poorly maintained equipment on the roof, combined with a build-up of leaf debris, resulted in a fire that killed two people, took six days to put out, and cost e29m in damage to assets and stock.

Hulme said business continuity planning was now applied by Nestlé UK to all areas of risk management, including hygiene and quality.

Business continuity management needed to be driven from the top and at Nestlé it was mandated by the executive board, said Hulme. The important thing was to embed the process by involving staff in various business areas in identifying risks, the probability of occurrence and the potential impact, he added.

Anything that reduced the chance of interruption to senior managers' incentivised business targets was a good thing, he said: "We have the answers within the business. It's about unlocking them."

Responsibility was now focused not on the IT systems department or the business continuity manager, but on every manager that had a department that provided a service - both internally and externally.

"That's been a huge change and we've seen a huge take-off in the past 18 months in Nestlé," said Hulme.

When problems occur you will recover, he added. "But what business continuity will do for you is that you will recover very, ?very quickly."