The factors that impact your organization’s approach to risk management span far and wide. Keep in mind that each organization – and even each facility – will be affected by risk factors in unique ways. Here, we take a brief look at six different types of risks that impact food and beverage companies.
There has been a significant spike in legal activity taking place across the food industry within recent years. In particular, there has been increased litigation by consumer advocacy groups, competitors, individual plaintiffs, and class actions.
Today’s consumers are more educated than ever before. If food companies are incapable or unwilling to divulge information, it can be expected that the public will mobilize and take action. Consumer advocacy groups are becoming more active as well: we have seen not only lawsuits against manufacturers, but also the FDA. There have also been recent instances of competitors taking legal action against one another, and of course, the prevalence of class action lawsuits has been relative to the number of foodborne illness outbreaks which have also risen steadily.
A final legal consideration to note is the involvement of the Department of Justice (DOJ) in certain industry happenings. The DOJ has teamed up with the FDA to prohibit repeat offenders from operating. In these instances, regulatory enforcement actually benefits the industry as a whole by helping to eliminate the lawbreakers, thereby giving compliant companies a better ability to self-regulate.
Regulatory Compliance Risks
There are many new rules affecting companies across the industry – particularly those under the FDA’s Food Safety Modernization Act (FSMA). In fact, there is a whole new approach to inspection philosophy, and while accommodating for these changes requires some adjustments on our part, we can view post-FSMA inspections as an opportunity to prove facilities are fully prepared and approaching compliance in the right ways.
To be inspection-ready, it’s important to ensure all of your programs are well-documented and well-reviewed. Designated personnel should also be able to speak intelligently about the facility’s hazard analysis, including why risks have or have not had preventive controls developed to address them. Everyone should also have a clear idea as to the role they play in risk management. For instance, if an employee at the receiving dock is questioned about supplier approval and verification activities, they should have answers in terms of what’s being done to mitigate risks. The better prepared your personnel is to handle these types of questions, the smoother inspections will go.
Customer Compliance Requirements
The changing landscape of private standard requirements is manifesting in the form of more in-depth contracting. To better protect themselves and enhance their communication of expectations, many companies are developing robust supplier agreements. Contracts are the best outlet for getting communications about risks in writing.
In particular, there has been an increase in requirements around testing. Whether testing is required prior to shipping to your customers or you’re asking your suppliers to test to ensure they are providing clean, safe, and wholesome materials, these efforts are being implemented to address the rising rates of recalls.
To minimize customer compliance risks, it is essential that someone thoroughly reads through supplier agreements and that everyone in your facilities clearly understands their duties and what is expected of them.
We now have an increased sensitivity in our technology to detect anything in products that is not supposed to be there. While this has increased our ability to protect the world’s food supply for the consuming public, it has also presented a new reality for risk checks by regulatory enforcers. You have likely heard the buzzword “swab-a-thon,” for instance, referring to the FDA’s microbiological sampling. The FDA is incorporating whole genome sequencing (WGS) into its sampling, resulting in a greater capacity to link foods, illnesses, patients, and production facilities. Some organizations are exploring the option of implementing WGS in their facilities as a preemptive approach. Those that already have begun to utilize WGS are doing so under strict and prescribed confines to test without facing significant liability. While the full impact of emerging science on the industry has yet to be revealed, it’s clear that we certainly aren’t going backwards when it comes to technological advances.
A broad range of inherent business risks impacts food companies. From sole source suppliers to vendor performance monitoring, some risks are business risks while others are regulatory. Others still may encompass both types of risks. What’s important is that you are taking a close look at all of these risks cumulatively. Assess internal risks, as well as those associated with training, documentation, and recordkeeping.
Performing a full assessment helps protect your brand reputation and business while also creating some operational efficiencies. When we fail to build mitigation strategies around business and compliance risks we’ve identified, we lose out on opportunities to improve and avoid complacency. Because risks are relative and constantly changing, assessments must be done on a continual basis.
Lastly, companies must also consider brand and reputation risks, and how they are to be addressed. Media, social media, and call center contact management strategies should be developed and put in place as needed. Additionally, companies can think in terms of risk prevention during research and development to minimize hazards proactively. From finding ways to avoid potentially risky ingredients to producing specific products in certain facilities, there are many ways to eliminate risks early on in a product’s lifecycle.
Companies must also consider some of the more serious brand or reputation risks they could face in the wake of a crisis, such as the impact of losing customers, consumer loyalty, adverse regulatory relationships, recalls, and significant brand damage.