Call for government to help firms at risk from insolvency and swine flu

Trade bodies are urging the government to increase its credit insurance cover to more food and drink companies, as risks to the supply chain continue to soar due to the economic climate and the impact of the swine flu virus.

According to a 2009 Risk in 21st Century Supply Chains ​survey from Aon, food and drink companies are increasingly cracking down on risky suppliers and taking a “hands on” approach to managing supply chain risks. And nearly three-quarters (74%) of businesses, including food and drink manufacturers, are making plans to safeguard businesses, spurred on by the threats of increasing insolvency and the impact that the swine flu virus could have on producing and delivering goods.
Aon, therefore, argued that the government could do more to help businesses manage risks. It said that many food and drink manufacturers have not benefited from the government’s credit insurance top-up scheme, because the credit limit is set at only £1M. So the government should consider increasing the limit to £10-15M, according to Aon.
“The government’s once promising top-up credit insurance scheme has failed to attract a significant take-up due to £1M credit limits that are only suitable for smaller businesses. While ironically, as most SMEs are private companies without financials available for insurers to assess their credit worthiness, cover is being cut rather than reduced. This means there is no cover in the first place for the government scheme to top up,” said Susan Ross, director of Aon Trade Credit in the UK.
The Food and Drink Federation is also urging the government to extend its credit insurance top-up scheme to help manufacturers. Charlotte Lawson, director of member services, said: “We continue to urge government to remove unnecessary red tape as the best way of supporting the UK’s largest manufacturing sector. Given the continuing economic challenges faced by food manufacturers, we hope the government will keep under consideration the proposed cessation of the scheme on December 31 2009 and extend it as necessary into 2010.”
Aon’s 2009 Risk in 21st Century Supply Chains​ survey also found that the harsher economic conditions had led to more stringent assessments of the risks in companies’ supply chains and business continuity plans. More than half (53%) of firms have instituted regular communication and audit policies with suppliers. And more than 15% of companies are actively managing the risks around contracts to ensure they are covered from the negotiation phase through to spelling out quality controls and contingencies.
There has also been a 20% increase in the number of companies investigating their suppliers’ suppliers to assess the strength of the supply chain.
“Such uncertainty in the global economy and a greater demand for corporate accountability has meant companies have a far more proactive approach to managing their supply chain. The good news is that the issue of supply chain risks has been taken on board by procurement and embedded in their performance management and audit processes,” said Grant Foster, head of enterprise risk management at Aon.
However, he said that 55% admitted to having no key performance indicators in place to monitor supply chain risk management performance.
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