When it comes to Risk Management in the Food Industry, particularly in light of a very global business environment and the consumer’s ready access to news and media through internet and social networking, and ongoing new required legislation and regulations to comply with, there are constantly issues emerging that warrant consideration when companies look at developing and implementing programs in this regard.
Food Sector Members with an interest in discussing Risk Management initiatives were pleased to have had representatives from AON Reed Stenhouse Inc., share some of their industry findings and case studies. We are grateful as well to have had ABB Inc., a robotics manufacturer who supplies to the Food Sector, in Brampton, Ontario hosting this special event!
During introductions, Members were asked what Risk Management really means to their business and if there had ever been a time where having a program in place may have averted undue or more severe challenges from a cost, loss of customer, employee issue, etc. There was some interesting discussion in that regard.
"Risk Management consists of identifying, evaluating, selecting, and implementing specific management measures to mitigate risk potential." - Food Safety Risk Analysis, University of Washington - http://depts.washington.edu/foodrisk/management.html.
From a Risk Analysis perspective, the process has changed dramatically over the past twenty years and has become the foundation for developing food safety systems and policies. Industry has moved from a very reactionary "hazards-based" stance to a more preventative, proactive "risk-based" approach that takes the well-being and impact on the public at large into account. As such, industry, government and consumers are calling for risk-based programs to manage all risks associated with the production, processing, distribution, marketing and consumption of food and food products.
As Manufacturers and Processors of food and beverage products and related goods, it was nice to have a global perspective or 30,000 foot level if you will, view of what risk management may mean to your organization perhaps providing some insight on questions such as:
* How do you manage risk?
* What tools are available to assist in that regard?
* How do we engage our people and speak about risk in general?
* What are some of the challenges that we may not readily think about?
* How does HACCP play a role in risk management?
* How do you successfully implement a risk management program and then subsequently evaluate it for that success?
Bill Besse and Jacinta Davies, both Sr. Vice Presidents with considerable experience in the Food Industry with AON Reed Stenhouse readily shared their experiences and thoughts relating to our subject at hand.
There are many changes driving industry and including a rapidly growing percentage of the population expressing interest in food safety concerns. The growth and availability of media and the internet have certainly enabled the consumer to access and share information on demand - both good and unfortunately, bad as well. But there are many other drivers as well and "Issues such as food safety, supply chain management, bio terrorism, security, genetically modified organisms, global warming and contamination can have financially devastating effects if not properly identified and addressed." - AON Reed Stenhouse Website:
* Expanded food safety certifications
* Globalization and the increased supply chain complexity
* Ongoing Regulatory changes
* Increasing product recalls
* Media coverage of accidental or malicious events
* Sustainability demands by customers, suppliers, end consumers, etc.
A company needs to identify all risks - including traditional and non-traditional potential issues. Look at what you are doing and what you could possibly do to mitigate any instances.
Using the Supply Chain as an example, we looked at where risks might develop and Members were asked to consider what the consequences would be in their own organizations if they did not have a plan in place to deal with the disruption that might occur - for example, what if there was:
* Significant property damage at supplier's facility (ie. fire, flood, etc.)
* Employee strike
* Contaminated product was received
* Damage to product received, etc.
Our Speakers suggested that we "Stress Test the Supply Chain" and make sure that those we have contracted with are able to fulfill those obligations.
There was a particularly interesting slide on a Cheeseburger, that really showed what the breadth of a supply chain - in this case surrounding ingredients - could be. At first sight, when we look at a Cheeseburger, we might consider 8 main components including the burger, the bun, the condiments, the vegetables and so forth. However, if you trace back the ingredients to make the bun, the hamburger, the condiments, grow the vegetables, etc. - there are in essence 85 products required to make that one hamburger! What happens if there is a significant interruption to any one of those 85 product suppliers and how does that impact your organization?
Bill and Jacinta mentioned the importance of reviewing your customer contracts and making sure that there are no gaps in their insurance policies. As an example, many supplier's insurance programs will not respond effectively to a significant contamination event so it is very important to know the impact the supplier has on both your company and on your brand.
There is a huge regulatory change for Food Processors in the US - US Food Safety Modernization Act 2011. Food processors are now the primary party. A copy of a AON's white paper on the new ACT is available by request from their website under Agribusiness at: www.aon.com. Implementation of this legislation will mean that there will be:
* Probably some labelling chaos
* Various regulation changes
* The recall authority will be stronger and based on a "reason to believe"
* There will be increased registrations and record-keeping requirements
* Food imports will be more difficult
* Traceability will be key
* Hazard analysis and foreseeable risks will be requested
* Food defence initiatives required
* Whistleblower protection provided
The focus will be on Food protection. Food defence is not just government issue - manufacturers will have to take responsibility and there is likely to be far reaching industry impacts as a result of this new US Food Safety Modernization Act.
We discussed the impact of food bourne illness here in Canada and the financial impact is tremendous. One in three Canadians will develop an illness of that nature. This represents $12-14 billion in annual costs to Health Canada. It stands to reason then, that there will be an increased focus on food protection and defence.
Reputation risk, brand protection and crisis management planning were also discussed. How do you deal with adverse publicity - bad news travels fast - and a company needs to know how to answer questions that are going to come from the press, the consumer, the suppliers, etc.
* Know your vulnerabilities
* Have a prominent spokesperson - honest, open and consistent in their message
* Perhaps having 2-3 spokespeople who are qualified to represent the company might be a good idea
* Make sure you have a plan in place:
Crisis event occurs
Crisis Management and community communication
Recovery from crisis
Post incident analysis
Another area of interest from a Risk Management standpoint surrounds the topic of Sustainability. Walmart has a scorecard that looks at exactly what kind of energy is used in producing a particular product. In the future, water will be an issue. Perhaps there is an opportunity to develop a scorecard in relation to water usage relating it back to wages and sales.
The key points to consider at the end of the day:
1. Evaluate or re-evaluate your risks
2. Stress test your programs; and
3. Assess any potential risk exposures that you may have.
An opportunity to discuss and network on the topic at hand followed and some interesting comments were shared relating to particular risk exposures and subsequent management of those threats which included issues with improper end use of a product, to bomb threats, to slips, trips and falls, to product recalls, etc. Additional discussion points are listed below:
* The need for sales and product development to come together
* Analyzing potential risk - when do you drill down
* Involvement of Officers and Directors in the process
* Maintaining Privacy
* Dealing with data breaches
* Preparing for a crisis from out of the blue - "black swan event"
* Labelling challenges
* Business continuity plans development
* Food defence plans
* Crisis management symposium
* Dealing with product recalls
* Testing and evaluating plans
* Manufacturing and reputational risks
There are a few whitepapers available on the AON Reed Stenhouse website - we did share one with those present with regard to "Food Safety & Defence" which can be requested from the AON website at http://www.aon.com.
Our Guest Speakers did an excellent job on providing us with a general overview on Risk Management and it was felt that this would be a good topic to drill further down on particularly in relationship to Business Continuity Planning, Crisis Management and Food Safety Defence Plans and we will certainly endeavour to work that into our Schedule for the EMC Food and Beverage Sector SIG Networking Events for 2012.
General roundtable networking discussion centred on the following topics of interest:
* Dealing with HACCP as a packaging supplier to the food industry - and the need for some standard guidelines
* Consistency in certification - regulatory requirements and compliance
* Supplier, customer, government audit frequency and impact
Our Host, Jeff Voll, Territory Sales Account Manager, ABB Inc., then provided those in attendance with an excellent overview of their company. ABB is a global leader in power and automation technologies servicing a wide variety of customers in any number of Sectors including the Food and Beverage Industry. The company has 117,000 employees in over 100 countries. We watched some video clips on the business in general and then on specific abilities within the Food Sector which was quite interesting. For those interested in robotic applications, there is a video that you can download from their site entitled "Ten Good Reasons to Invest in Robots" (http://www.abb.co.uk/product/ap/seitp327/cc4949febe7dcfe9c12573fa0057007a.aspx). Those reasons include everything from "reducing operating costs, improving product quality and consistency, as well as the quality of work for employees, to increasing production output rates, product manufacturing flexibility and reducing material waste and increasing yield". Members and Guests then enjoyed a bit of a plant tour and were able to see some robots in action!
On behalf of EMC Canada, special thanks to all of our participants, our Guest Speakers from AON Reed Stenhouse Inc., and our Host, ABB Inc. for participating in this very special networking Event!