Business interruption leading risk for underinsured food and drink firms: WTW

Business interruption (BI) was named as the top internal risk for almost half (48%) of food and drink companies in the next three to five years, up 10%, followed closely by supply chain risk on 40%, according to a global survey of 400 risk managers in the sector by WTW.

BI was also the leading cause of financial loss for food and drink companies in the last two years, but the survey finds 29% of firms do not have BI insurance cover, with their policies limited to property damage.

Publishing its Global Food and Beverage Risk Outlook 2024, WTW says the sector is building resilience to disruption caused by conflicts, global instability and climate change. Forty-seven percent of respondents are reviewing business continuity plans every six months, with many undertaking sustainability initiatives and integrating climate resilience into their risk management frameworks. However, Simon Lusher, global food and beverage leader at WTW, said risk managers should further address exposure to BI losses.

“While our survey shows that businesses are taking steps to become more resilient in the face of challenges, as part of the process it’s a good idea to reassess the critical issues in the business, areas of focus, how they can manage the key risks they face, and where they might need more protection. That way, businesses are prepared for almost every outcome and operations can keep moving forward,” he said.

Product recall and product labelling also both feature in the top ten internal risks facing food and drink companies in the next three to five years. “A single food safety incident or product recall, amplified on social media, can tarnish a brand’s image and erode consumer trust,” the report says.

WTW says the food and drink sector is faced with multiple risks and supply chain insecurity. “Escalating external threats are heightening instability risks across companies, spanning political, climatic, cyber and workforce domains,” Lusher said.

In a separate question about external risks, supply chain, infrastructure and regulatory risks were in the top three. Global conflict and geopolitics was named by 46% of respondents as the main driver of supply chain risk for their business, with the wars in both Ukraine and Gaza continuing to threaten the sector’s supplies.

“The food and beverage industry is exposed to a widening range of disruptive forces, from droughts and natural disasters to political unrest and trade disputes, as well as perennial risks such as product recalls and factory and warehouse fires,” the report says, with all impacting production and delivery.