Managing the risk of contamination, product extortion and recall
Needles in strawberries; listeria on rockmelons; metal in lollipops – each of these recent food supply crises has delivered a signal warning about the relative fragility of Australia’s food supply chain, and the serious implications that a food safety issue can have for business.
There are an estimated 2 million-plus food poisoning incidents each year in Australia – as well as injuries from foreign bodies in food and beverages1. Besides the direct human impact, there are profound business continuity implications for organisations across the supply chain.
In the decade to the end of December 2017 Food Standards ANZ coordinated 626 recalls in Australia alone2.
Australian businesses are still counting the cost of the rockmelon and strawberry crises – but the impact has already been profound, with significant business interruption and brand and reputational damage to the industry.
Aon’s 2017 Global Risk Management Survey identified damage to brand and reputation along with product recall as two of the greatest risks facing the food agribusiness and beverage industries.
Australia’s food and beverage sector is highly diverse and becoming more complex, from growers, through to processors, packaging, distribution, all the way to retailers. Each link in the chain can be exposed to tampering, sabotage or extortion (both primary and copy-cat, which proved the accelerant in the recent strawberry-needle crisis), while contamination from the grower can impact other businesses in the chain, and introduce costs associated with decontamination required throughout the network, along with safe product destruction.
Where a product recall is prudent, there are additional costs and complexity. Recall programs need to be bespoke in order to ensure that the correct exposures are covered. Companies must also pay careful attention to the way they manage public relations following an incident in order to minimise the brand and reputation impact of a recall.
Each year the sector faces a significant number of product extortion exploits; victims are wide ranging – with smaller enterprises considered particularly vulnerable. Most of these events will not hit the media as they handled internally or with the help of specialist response firms.
For businesses responding to any form of food and beverage supply interruption, the challenge is compounded by social media which has transformed the way that consumers interact and share information. The 24-hour news-cycle also increases the risk of copy-cat attacks, exacerbating the problem. A critical requirement for any food and beverage business is to have a well-developed, well practised social media crisis management plan, adaptable to address specific incidents. A one size fits all approach will not suffice – authenticity is critical for successful business recovery and to minimise brand impact.
The sector is governed by the hazard analysis and critical point (HACCP) food safety methodology that allows businesses to identify potential hazards and plan how to manage them. Current legislation means companies must report any suspected food tampering within 24 hours.
In the wake of Australia’s recent strawberry-needle crisis, there have been calls for x-ray machines and metal detection devices to be implemented in the supply chain. The government meanwhile is considering stiffer penalties for perpetrators.
Even with these measures, food and beverage suppliers must remain vigilant to protect their customers and their business.
Protecting customers; preserving business
Aon has experience working at all levels of the food and beverage supply chain and a deep understanding of the unique challenges faced by the sector. Our product recall and contamination experts can help identify the maximum foreseeable loss that a business might experience, allowing appropriate coverage and risk transfer to be negotiated.
Contaminated Products policies also typically offer unlimited access to crisis management specialists and tampering experts who can work with the business to help ensure all food safety and government requirements are met. Expert support is also available for stakeholder management, branding and media relations support as well as rehabilitation costs in the case of:
- Accidental contamination
- Malicious contamination
- Product extortion
- Government mandated recall
- Adverse publicity
- When were your recall and crisis management plans last updated? A food recall plan is a legal requirement for all food manufacturers, importers and wholesale suppliers.
- Do your plans include the correct people and current contact details?
Have you developed a crisis media relations plan?
- Do you have a tested social media engagement plan?
- Have you quantified the maximum foreseeable loss caused by business interruption due to a contamination or recall event?
- Are you able to cover those costs directly or through insurance?
- Do you have access to expert support in the event of an incident?
Contact Roger, or speak with your usual Aon contact, to ensure you have the appropriate production contamination protection.