Statistically, around 90% of businesses that suffer a catastrophic loss are likely to go out of business within two years¹. It’s a sobering thought, especially given the many challenges we currently face as a result of the ongoing economic uncertainty, increase in severe weather events and global geopolitical instability.
While business resilience is a growing concern within the Food and Drink Insurance, it remains a relatively new concept for most organisations within the industry, with few currently moving beyond reactive crisis management.
Although constraints on resources can impact the ability to implement a business resilience plan, especially on known issues, there’s still a very good case for the sector to consider how they would deal with a significant interruption.
The food and drink manufacturing sector faces a number of specific challenges when it comes to business resilience or business continuity planning in the event of significant interruption, with many of the challenges exacerbated by the very nature of the food and drink industry:
- A few key customers often account for significant elements of turnover
- Many products are perishable, leading to lower maximum tolerable periods of disruption
- Seasonal factors include harvest periods, increased demand periods and seasonal products
- Limited ability to outsource due to required customer and other standards (such as BRC, Red Tractor etc): the market is generally competitive with low margins and there may be seasonal capacity issues
- Complex supply chains with limited margins for error
- Challenges around sourcing premises, installing hygiene measures and gaining accreditations.
Internal and external risks
Food and drink manufacturers face many and wide-reaching risks that could cause significant interruption in their ability to supply products. While traditional business continuity plans take into account issues that may occur at the premises, such as fire, flood, breakdowns etc, a number of other factors also exist that could produce a significant challenge should they occur. Business resilience planning needs to consider both internal and external risks that may impact the organisation and its ability to supply.
Significant factors can include:
- Political risks, sanctions or inability to supply from countries of origin
- Transport risks, ranging from shipping issues to foul weather conditions, causing a failure to deliver
- Significant workplace accidents
- Product issues, including recalls and the associated reputational risk
- Impact on IT systems
- Failure of harvest
Risk Engineering Support from PIB
Working with our corporate clients in the food and drink manufacturing sector, we help to build an understanding of the risks to business resilience that can face an organisation, and we go beyond simply finding risk transfer solutions. Our experienced team has the capability and know-how to provide guidance and support to businesses on all aspects of enterprise risk management and business resilience, and will work with your own risk management processes to integrate resilience into standard business planning.
Practical support includes:
- Help in identifying risks and maximum foreseeable losses to ensure the correct (and not excessive) levels of risk transfer are put in place
- Identifying additional off-site risks and ensuring they are appropriately considered
- Assistance in understanding the potential mitigating measures - both to prevent risks from materialising and also how the business might respond in the event of an incident.
To find out how PIB can help your food and drink manufacturing organisation to achieve greater business resilience, please contact David Plowman and his team on 0330 058 9863 or email: firstname.lastname@example.org¹ Source: Jacobs and Weiner, CPA Journal 2008