Enterprise Risk Management (ERM)

In simple terms ERM is a methodology/process for identifying risks and opportunities that if not addressed could seriously impact on a business ability to meet its objectives (profitability).
Enterprise Risk Management (ERM)
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We don’t have space here for a long explanation of ERM and in any case many are available on the web. In simple terms it is a methodology/process for identifying risks and opportunities that if not addressed could seriously impact on a business ability to meet its objectives (profitability).

ERM is evolving to address the needs of a wide spectrum of stakeholders to ensure their needs are being met. It can also be used to balance the needs of different stakeholders. Arguably the most important element of ERM is that it engages senior executives in debates around levels of risk, what to do about them and whether the residual levels of risk are, on balance, acceptable.

For Food companies one of the most important risks to profitability is food safety. Significant food safety recalls can heavily negatively impact the bottom line and can, unlike quality recalls, even endanger the survival of the company.

Food safety reporting to company Boards is often incorporated in to the broader ERM reporting and Key Performance Indicators (KPIs) are used both as indicators of performance and as points around which discussions about levels of residual risk can be had.

ERM reporting is also used in discussions with among others, debt risk evaluation agencies and insurance companies. 

We'd be interested on hearing your thoughts on the following discussions

  1. Is your food company using ERM and if so, does the ERM process include food safety?
  2. Is the process annual or more flexible to deal with evolving risks as they occur?
  3. Does your company use external reports like the World Economics Forum risk report as input into the ERM process? 
  4. What are the KPIs and do they focus narrowly on number of audits, audit scores, recalls, or do the KPIs reflect the big areas of risk such as water availability, international conflict, and the intersection between food safety and the green agenda? 
  5. Is there somebody on the companies Board who really understands the food safety elements of risk and can interrogate whether they are being managed, ensuring learning leads to prevention?

Please click here above to contribute to these discussions - it would be great to hear everyone's thoughts.

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Go to the profile of Hugo Gutierrez
3 months ago

All: good discussion topic! My answer and comments below :

1 - yes 

2- at least two times a year with a leadership team to review progress, and one owner per risk to ensure progress and execution of agreed actions 

3 - not really, however they have assessed the process with consultants

4- each risk has  a template with objective, team members , actions, etc. This also includes KPI’s for each risk. Food safety includes audits, complaints and plant risk profile. New and proactive KPIs such as program implementation %

5- partially. They assess compliance .. some FS knowledge

comments: a proactive approach is needed. For instance, we should   Measuring : CAPA closure % and its effectiveness, culture and behaviors, FS capital approval and execution. Technology to track execution, maturity of the programs is key

Go to the profile of Roy Kirby
3 months ago

Hi Hugo - I agree we need to move towards more proactive approach looking at the KPIs - Going forward I am convinced we need to move away from looking at food safety in just terms of compliance. I would also add that the best dialogue will be with people who have been practitioners in the field.

Go to the profile of Roy Kirby
about 2 months ago

Building on the discussion and a topic I will be addressing at the up-coming Food Sure Summit in Madrid - The Intersection between Food Safety and the Green agenda

 In the previous piece in this series on Enterprise Risk Management (ERM) a question was asked as to whether your company is using ERM to manage the intersection between Food Safety and the Green Agenda.

 The FAO has indicated 5 ways climate change (rising temeratures) can impact on Food Safety

  • Increase food and waterborne diseases
  • Increase uptake of toxic heavy metals in staple crops
  • Increase spread of fungal infections
  • Increase spread of plant pathogens driving an increase in pesticide use
  • Increase harmful algae in sea food

 But are there other ways that Companies response to addressing the Green Agenda may impact on Food Safety. The answer is yes: many years ago, and in an early attempt to do the right thing in terms of the environment a multinational food company switched to using recycled cardboard for its outer packaging. The unintended consequences was the unexcepted migration across the plastic inner packaging of unlooked for chemicals present in the recycled cardboard. When the issue was discovered and reported by NGOs it resulted in large and expensive recalls and significant damage to the company’s reputation, even though the intentions were undoubtably good.

 The answer to the question – can you use ERM to manage the intersection between Food Safety and the Green Agenda – the answer is yes. So the answer to the question – should I be using ERM to manage the intersection between Food safety and the Green agenda – is also yes.

 The method/process involves identifying what are the main areas where the Green Agenda will impact your supply chain (e.g. water use, recycled packaging, Changes in agricultural practice including reduced pesticide use and regenerative agriculture) and identifying the potential impact of these changes on the know hazards (microbiological, chemical, physical). The final steps are then identifying the correct risk response (avoidance, reduction or acceptance) and setting the correct monitoring.

 Questions

1/ which of the following elements of the Green Agenda are likely to impact your business´s food safety controls – Energy use reduction, water recycling in agriculture or manufacturing plants, regenerative agriculture, reduced plastic use, reduced sanitiser use, packaging recycling?

 2/ Will the consumer accept lower levels of food safety as part of a company response to meeting is sustainability objectives?

 3/ is your food safety budget increasing to help meet the increasing complexity of meeting both the food safety and sustainability commitments?

 4/ how well do you believe your companies senior execs and Board understand the impact on Food Safety of meeting Sustainability commitments?