Continuity risks in the food industry: contamination (4/4)

In the past, most financial risks for a company originated within the company itself. Today, 90% of such risks are external to the company. This also applies to food companies. An insurance policy tailor-made to your company risks combined with a Business Continuity Plan (BCP) offers financial protection. So, what are the most likely risks for food companies?

Continuity risks in the food industry: contamination (4/4)

Each week of this month, we will examine a single risk that can have a large impact on your business operations. After fire, cybercrime, and climate change, we will round off our series on continuity risks in the food sector with contamination. How do you protect your food company from the impact of contamination damage?

What risks are associated with contamination in the food sector?

You’ve probably already heard something like the following in the media: a particular batch of minced meat is removed from supermarket shelves and the public is asked to return any such meat that they had purchased. The minced meat was contaminated, for example, with salmonella. The contamination was only discovered after the meat reached the supermarkets.

Contaminated food is the biggest nightmare for any food company. The risk of contamination primarily relates to food producers, but also food processing companies and distributors. Such an occurrence burdens your company with a substantial amount of responsibility.

A contaminated product that is placed on the market can, in particular, pose a major threat to public health. There is also the high cost due to contamination damage. This involves costs related to determining the contamination, detecting and recalling all delivered products, making an inventory of the damage caused by already used products, protecting the reputation of the company using appropriate communication, etc. Moreover, this situation also means that the food company loses a lot of new income due to production stopping temporarily or customers avoiding your business. A food company needs to be robust to cope with the avalanche of challenges caused by contamination damage.

And what if the contamination was not an accident? There have been cases where criminals threatened to poison a food company’s food unless a ransom was paid.

How can your company reduce the risk of contamination?

Contamination is related to hygiene and safety. Although every food company strives to achieve zero tolerance concerning contamination, this risk can never be completely eradicated. How do you establish appropriate hygiene and safety restrictions in your company (to the utmost)? We recommend that you consolidate such matters into your Business Continuity Plan (BCP):

  • Clearly, good quality control is of the utmost importance. Preventive measures, such as metal detection and scanning, must be included in your policy.
  • We also recommend organizing a tabletop recall exercise at regular intervals to ensure all emergency procedures are working correctly.
  • Finally, appointing a spokesperson to handle contact with the outside world is an absolute must. We must emphasize the importance of media training for this person. If your company is confronted with contamination damage and journalists are on your doorstep, your spokesperson must communicate clearly and appropriately about the damage and the consequences. Your communication strategy will determine the reputation of your company.

What insurance solution will cover your food company in the event of contamination?

Recall and contamination insurance offers a financial safety net to protect your business as much as possible in the event of contamination damage. This specialized insurance is an essential part of the insurance package of every food company given the far-reaching financial consequences of contamination damage.

On the one hand, such a policy reimburses all costs necessary to remove the contaminated products from the market (i.e. a recall). On the other hand, we also reimburse all of your costs: the cost price of and destruction costs for the contaminated products, the decontamination costs, loss of profit due to lost turnover, and so on. In the event of a major food crisis, a recall and contamination policy is a food company’s life insurance policy.

Gerrit Mets

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