Risk management advice soothes food recall dangers and disasters?
extensive product recall, says risk management firm Marsh,
writes Lindsey Partos.
When the banned carcinogenic colour Sudan 1 was detected in the UK food chain earlier this year, over 600 well known processed foods were pulled from the shelves.
Too early to put a true figure on the cost of the recall, that includes sales loss, destruction, management time, and consultants fees plus the 'softer' costs like brand damage, estimates are rolling in excess of €200 million.
In today's complex food chain, exposed to risk on a daily basis, contaminated products insurance - not obligatory by law - could be an essential way to cover such potential vulnerabilities.
Speaking with FoodNavigator.com recently, Marcos Garcia Norris at insurer AIG Europe estimates that about 70 per cent of food and beverage firms do not have this type of insurance.
"Most of the large firms do, and the SME's are starting to, but overall we predict that about 30 per cent of food and drink firms have contaminated products insurance," he says.
Starting from a minimum premium of about £2000 a year for £1 million of cover, Norris says that in recent years price has been prohibitive for SMEs, but competition is now rife, pushing the prices down and opening up the market: "We're seeing rising number of firms asking for and buying this product".
According to AIG Europe, the average premium ranges from between £8,000 and £10,000 for smaller companies.
But for Katherine Ann Cahill, managing director of risk consulting practice Marsh, insurance alone is an insufficient armament for a food firm facing ongoing, and new threats, to the food chain.
"In the past risk managers have said they're OK because they have insurance.
But purposeful (terrorism) and non-purposeful (pathogens) threats to the food industry are increasing," says Cahill.
While one insurance policy will differ from the next, for many product recalls there are regulatory exclusions: if the product is illegal for instance, as was the case of Sudan 1, the insurance firms may not cover the costs. Leaving the food firms to foot a profit eroding bill.
"From a legal point of view, it is never a defence that 'you didn't know'," adds Cahill.
Marsh offers risk management packages based on four preventative and 'curative' pillars: process and protocol (regulatory requirements); help in the midst of a product recall; brand damage 'rehabilitation'; and litigation advice, including experts to speak in court.
The firm, that also helps firms to put together insurance claims, declined to disclose the price range of their risk management services, opting to say they "are well priced".
New rules that seek to slice away risk will also, ironically, open up the food industry to more food recalls and might influence food firms to take on board greater risk management spending.
"Yes, we will have more recalls," says Cahill.
Slotting into the European framework regulation EC/178/2002 laid down in January 2002, new legislation (Articles 14 to 20 of the regulation) enforced in January set out general provisions for imposing the traceability of food and feed.
For the new 'one up-one down' system, all players in the food industry must know who has delivered the product to them, and to whom they have delivered the product.
Every operator, from buyers of wild products, to manufacturers, caterers and retail stores must be able to immediately provide this compulsory traceability information to food control officers on request.
Cahill believes, along with others, that ironically the new rules will lead to more recalls.
