The food and beverage industry faces numerous risks that, if not identified and managed effectively, can impact the operations, profitability and reputation of manufacturers. As a result, it is crucial for companies in the F&B industry to proactively identify, assess and manage these risks to protect consumers, ensure compliance and maintain business continuity.
Tammy Gamble, partner at The Bonadio Group, speaks to The Manufacturer about how to manage these and other risks in the food and beverage industry.
Can you give some background into The Bonadio Group?
Founded in 1978, The Bonadio Group is a nationally ranked Top 50 CPA firm offering accounting, tax and consulting services to clients of all sizes. The firm’s professionals deliver practical, proactive and innovative solutions to help clients reach their financial, compliance, management and personal goals.
What impact has the recent global events had on the food and beverage sector?
During and post the COVID pandemic, the reliability of the supply chain suffered greatly, and as further disruptive events like natural disasters become more common, it is even more difficult to rely on imported goods and ingredients for production without disruption. Businesses are starting to pursue mitigating efforts, but it’s definitely an issue that has remained top of mind for the food and beverage sector.
Additionally, the volatility of the economy has had significant impacts on the industry, as it has every industry. The food and beverage industry is dealing with everything from the rising cost of materials and ingredients to increased cost of capital to a major workforce shortage, especially in manufacturing. Many are turning to mitigating solutions like automation and technology to try to combat these issues, but these solutions can pose their own risks and take time to implement.
How do the current risks for food and beverage manufacturers differ from other sectors?
The food and beverage sector is subject to rigorous food safety and handling regulations that, if not followed, can lead to serious risks to the health of consumers or the potential for lofty fines and penalties from organisations like the Food and Drug Administration (FDA) in the US or the Food Standards Agency (FSA) in the UK as well as detrimental impacts to company and brand reputation.
They are also more vulnerable to legal ramifications should there be instances of food-borne illnesses or food contamination of any kind in their facilities. Because of this, the control and oversight of all production practices and hygiene standards is even more critical.
Additionally, the food and beverage industry is highly exposed to risks of changing consumer preference whether that be related to trends, sustainability or health and wellness preferences which could poses challenges to manufacturers to evolve to meet the demands of their target consumer.
What does the current landscape look like for food and beverage manufacturers?
The current landscape continues to be challenging given the ongoing impacts of rising costs, inflation, supply chain and staffing resource constraints, and changing consumer demands and preferences to name a few.
Accordingly, the focus of executives should include risk assessment and mitigation programs and strategies along with efficiency and innovation enhancements to be prepared to avoid disruption as much as possible in the event of these challenges. This will require more sophisticated risk management programmes and employee training that manufacturers will have to allot resources towards.
Can you elaborate on the solutions for the following risks for food and beverage manufacturers?
Food safety solutions: Manufacturers must internally establish and enforce rigorous food safety procedures at every level of the supply chain. These should include protocols like regular inspections and testing and formal reviews of facilities and production processes.
All suppliers and transportation partners should be expected to adhere to the same standards and be subject to these internal requirements as well to ensure that contaminations are avoided throughout the supply chain.
Supply chain risk solutions: Diversifying supply chain partners and building localised stockpiles of critical materials and ingredients are effective ways to mitigate supply chain risks and avoid disruption caused by potential issues like natural disasters, politics, supply shortages and more.
Regulatory compliance risk solutions: Regulations and standards from federal entities are everchanging. To avoid risks of non-compliance, it’s imperative to build an internal compliance programme with elected officers tasked with monitoring updates to regulations and ensuring the proper education of new standards throughout the organisation.
Operational risk solutions: As with any industry that relies on manufacturing, the food and beverage industry faces basic risks to operations everyday – from equipment failures to inadequate staff education – all of which can lead to financial consequences and unplanned downtime.
To avoid these risks, manufacturers must make sure they are rigorous in their training programs and there are robust risk management programmes in place so that staff is aware of what to do in the event of a malfunction.
Cyber risk solutions: As cyber threats become more sophisticated, it’s more important than ever for food and beverage manufacturers to have processes in place to regularly assess vulnerabilities and proactively identify risks before a breach occurs. Regularly backing up data, setting up multi-factor authentications, and conducting in-depth data safety training across the organisation are good places to start.
97% of food and beverage manufacturers in the UK are SMEs (small or mid-size enterprises) – how do the challenges differ?
Many of the challenges aforementioned are faced by food and beverage manufacturers across the board – despite the size of the organisation. The most important thing for any organisation to understand is the necessity of proactivity.
Having a process for regular risk assessments and mitigation plans in place for your biggest disruption risks ensures you are well-prepared should you be faced with an issue. With this general principle in mind, mitigation plans can be adjusted to account for the size, resources, and specific risks of your organisation.
Tammy Gamble is a partner in The Bonadio Group’s Assurance Practice with over 25 years of audit experience. She serves privately-held and public clients in a variety of industries, including manufacturing and distribution, retail and consumer products, financial services, technology and telecommunications.
Tammy deals with various accounting issues, including complex revenue recognition, derivatives, debt offering, initial public offerings and registration statements, M&A, reverse mergers, goodwill impairment assessments, restructuring actions, restatements and fraud matters.
For more stories on Leadership click here.
