Risk Mitigation Costs for Food and Beverage Supply Chain Seen as Justified

Companies in the food and beverage industry agree that the benefits obtained from risk mitigation measures outweigh the costs, according to a survey conducted by the certification body DNV Business Assurance and GFK Eurisko.

The survey of around 500 food and beverage professionals from companies in Europe, North America, South America and Asia suggests that food safety, cited by 63% of respondents and quality 54% are the areas of supply chain management that companies consider particularly vulnerable. The figures could reflect the scandal earlier this year that saw some supermarkets clear their shelves of food products found to contain horsemeat.

Financial risks at 38% are deemed less threatening, together with legal and regulatory compliance (35%), and environmental challenges (29%). Last on the list are community relations (10%) and ethics (8%).

DNV comments that the food and beverage supply chain is such a complex and diverse world that there is no such thing as a single solution to reduce risk and companies must undertake a range of actions.

No single action is more often resorted to than the others. Companies will implement them all to a proportion of over 80%: from the exclusion of suppliers based in sensitive areas, to supplier diversification and development, as well as assessment (audits and evaluations), certification according to regulatory standards, crisis management plans and risk transfer.

Over 50% of respondents said that they were pushed to adopt chain-wide risk prevention and management measures by the needs and demands of their customers, which came ahead of the influence of public opinion (39%) and legislation (36%) as exerting the highest pressure.  This proves particularly true of small enterprises, while approximately 60% of large companies feel that chain-wide risk management is an integral part of their corporate strategy, and a strong differentiating factor.

Companies that have adopted chain-wide risk mitigation actions state that they have materially benefited from them, both in terms of product quality enhancement (74%) and competitive advantage (51%) and in terms of brand reputation (42%), an aspect that is particularly relevant to final product owners.

“Mitigating risks is about being pro-active,” said Luca Crisciotti, chief executive officer (CEO) of DNV Business Assurance. “Managing each step in the supply chain must be part of a long-term strategy that aims at creating value in every aspect and for all stakeholders: from the grower to the processing plant, all the way to the consumer.

“Customers will reinforce their pivotal role, because the product will increase its added value from the perspective of quality, safety and environmental, social and ethical requirements. The surging attention for these areas shows how companies are increasingly shifting towards an approach that integrates sustainability into corporate strategies.”

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