Processors flock to risk management services says study

By Ahmed ElAmin

- Last updated on GMT

Related tags: Risk management, Food, Management, Insurance, Food standards agency

The safety of food and drinks has risen to the top of UK boardroom
agendas in 2007 with more of them taking out insurance policies on
recalls, according to a report released today.

UK-based risk management consultancy Razor and Bermuda-based XL Insurance produced the report. The two teamed up in 2007 to offer a package of insurance and crisis management services linked to food product recalls and alerts. The two companies say that inquiries from food and drink manufacturers has out-stripped their original targets and indicates that the industry is waking up to its risk management and corporate governance obligations. "It seems that increasing regulation and EU communication around food scares has prompted leading companies to take action much faster and more readily than in the past - even though consumer reaction is said to be increasingly unresponsive as the proliferation of warnings causes apathy among much of the population,"​ the report stated. The companies report that interest in the product is coming from all sectors of the food and drink industry. The highest interest is noticeably from contract manufacturers and also from the more exposed risk segments like meat, dairy and drink, said Chris Woodcock, Razor's managing director. "As retailers are leading the charge for stricter standards of food safety and are unrelenting in pushing costs back to their suppliers, it is becoming increasingly important that manufacturers have not only the right protections in place but also have appropriate pre-emptive risk management systems in place,"​ Woodcock said. Some of the more vulnerable sectors have realised their potential vulnerability faster than most, although the companies are waiting to see how this trend develops through the summer, he added. About 1,300 food safety incidents were investigated by the UK Food Standards Agency last year. It market the first time the FSA has created an industry-wide, reliable database for the two companies to analyse. "The profile that these incidents now command - and the greater requirement for reporting and swift action across Europe - seem to have spurred many who have long been considering their approach to finally decide and get on with it,"​ Woodcock said. "It's ironic that some surveys report increasing consumer apathy at the same time - the more alerts, the fewer take any notice."​ Ed Mitchell, XL Insurance's senior underwriter for product recall, said the insurance product was designed for a food and drink industry that faces increasing public interest in safety as well as tougher regulatory scrutiny. "Companies are as much concerned about protecting their reputation as the financial impact of a product recall and we have already seen the benefit that our integrated crisis management service brings to our clients,"​ he said. In the last six months, action by both the FSA in the UK and the FDA in the US has prompted a surge of companies intent on being much more proactive in their attempts to protect both their balance sheet and their brand, he added. "This is a very positive sign for consumers and for retailers - a sign that manufacturers have moved good risk and crisis management way up the agenda and are intent on protecting the integrity, safety and traceability of all their ingredients and products to a greater extent than ever before,"​ Mitchell said. This year the Food Standards Agency (FSA) has dealt with 81 food alerts issued to local authorities and 478 notifications to the European Commission's Rapid Alert system for Food and Feed. Earlier this month, the US Food and Drug Administration (FDA) also announced a new advisory committee designed to counsel the agency on how to strengthen the communication of risks and benefits of FDA-regulated products to the public.

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