Introduction
2 / Managing global risks and opportunities in the food and beverage sector
Global population hit 8 billion in 2022 and is expected to reach 9.8 billion by 2050.
The UN has estimated that food production will need to increase by 70% to feed
everyone
1
by the middle of the century.
Yet even before the COVID-19 pandemic the food and
beverage industry was facing massive challenges
including:
• climate change
• more frequent and more severe natural catastrophes
• water and labor shortages
• human and livestock pandemics
• land degradation and deforestation
• further global urbanization
• pollution and ocean acidiication
In this review WTW colleagues in the areas of crisis
management supply chain disruption environmental
risk product recall and business continuity look at what
our latest global food and beverage survey tell us about
the emerging risk landscape for the food and beverage
industry.
The review is based on our webinar of 25 January 2023.
1. United Nations UN News https://news.un.org/en/story/2013/12/456912
Managing global risks and opportunities in the food and beverage sector / 3
WTW Global food and
beverage survey, 2022
The WTW Global food and beverage survey
2
asked
250 global senior executives from the sector for their
views on the opportunities and obstacles facing their
organizations and the external factors that are posing
the greatest risks.
As the world emerges from the pandemic it has been a
time of mixed fortunes for the food industry. Even while
geopolitical tensions escalate in Ukraine and the aftermath
of the pandemic continues to disrupt supply chains and
limits available labor our survey found a general feeling of
optimism plus a focus on stability and resilience.
2. WTW Global Food and Beverage Survey Report 2022 - https://www.wtwco.com/en-gb/insights/2022/04/global-food-and-beverage-survey-report
Figure 1: WTW Global Food and Beverage Survey 2022 headlines
Environment and
reputation are the biggest
risk factors
Legacy of the pandemic
continues to impact the
industry
The sectors top risks may
not be fully covered
Companies are optimistic
about the future
Geopolitical uncertainty is
a barrier to
addressing risks
Businesses are prioritizing
stability and resilience
The lessons of COVID-19
are being turned into
opportunities
Business leaders named
the environment as their
greatest external risk
(40%).
Brand and reputation
which is linked to
ESG issues such as
sustainability and anti-
corruption was the
biggest internal risk (46%).
Supply chain issues (37%)
and problems attracting
and retaining talent (37%)
topped the list of obstacles
to achieving strategic
objectives.
More than two-thirds
(68%) of respondents
said their company had
no speciic insurance for
environmental risks.
This igure was 63%
for cyber risks 54% for
reputation and 40% for
product recall all of which
ranked highly as
risk factors.
Despite the challenges
70% of food and beverage
organizations are
optimistic that the sector
will be more proitable
over the next two years.
External factors including
geopolitical factors
(60%) are seen as a major
challenge to addressing
risks over the medium
term.
Lack of access to suitable
risk transfer solutions also
ranked highly (43%)
as did a lack of board
buy-in (45%).
Senior executives named
stabilising the business
(41%) as their top priority
over the next two years
ranking this well
above growth.
Businesses transformed
themselves to adapt to a
new environment in the
pandemic.
45% said continuing
with adaptations such
as automation and
digitalization were among
their greatest opportunities.
4 / Managing global risks and opportunities in the food and beverage sector
Navigating geopolitical risks
The geopolitical challenges facing the food and
beverage industry in 2022 were dominated by the
conlict in Ukraine with the impact felt well beyond
those operating in the region.
At the same time several other geopolitical themes
are also impacting the food and beverage industry
underlining the need to understand likely global and
local risks.
Jo Holliday
Global Head of
Crisis Management WTW
Jo looked at how the sector can steer
a safe course in turbulent times.
Monitoring and evaluating geopolitical risks should form
part of a companys planning with an adaptable agile
team in place ready to respond to future developments.
Recent geopolitical incidents have had an impact on
the political violence insurance marketplace relecting
the level of losses experienced by clients so a review
of geographical exposures insured values and business
indemnity periods continues to be prudent.
Conlict in Ukraine
Because the potential for conlict in Ukraine was
well-lagged in advance some clients early warning
systems enabled them to activate effective support and
plans. Others acted quickly to put measures in place
to protect their people and assets. A key focus was the
safety & security of their people.
Many companies with manufacturing facilities in
Ukraine were keen to maintain production in order to
support the Ukrainian population and to continue to
make products available. In the areas most impacted
the focus was on securing raw materials and ensuring
that hazardous chemicals were safely stored or moved
to safety to avoid the potential for accidental leakage or
intentional misuse.
Factory damage in the East of Ukraine has been
widespread. Rebuilding plans have largely been
impossible due to the ongoing conlict and lack of
access. Future rebuilding will also be signiicantly
inluenced by the lack of availability of machinery and
equipment further extending the expected period of
business interruption and cost of reconstruction.
Figure 2: The nature of geopolitical risks
People
Assets
Business
Resilience
Initial
relocation
Supply chain
Immediate
threats
Supply chain
Country
re-entry
Displacement
and mobility
Impact
analysis
Trade wars
Raw
Manufacturing
sites
materials
Sanctions
Inflation
Energy
supply
People Assets Business resilience
345.2 million people projected to be
food insecure (up 200 million on
pre-pandemic levels)
3
3. World Food Programme. A global food crisis. https://www.wfp.org/global-hunger-crisis
Managing global risks and opportunities in the food and beverage sector / 5
Decoupling from China
Although tensions between China and the West have
been on the radar for quite some time the pandemic and
conlict in Ukraine have crystalized potential geostrategic
competition and disruption to the global economy
businesses and supply chains.
Decoupling those inancial and supply chain integrations
will be a strategic objective for governments and policy
makers in the years ahead. As the trade tensions between
China and the West increase certain industry sectors may
become retaliatory targets including consumer brands.
The food and beverage industry was a prime target of
retaliatory measures against U.S. tariffs on steel. No longer
an academic or policy issue managing this transition will
be an operational challenge. Gray-zone aggression towards
corporates such as cyber-attacks or intellectual property
theft is likely to intensify with the aim of weakening
businesses and economies.
Food nationalism
In response to the pandemic and geopolitical
disruptions some governments and organizations have
sought to bring their supply chains home replacing
foreign products and services with domestic alternatives.
Recent EU legislation
4
that came into force from 1
January 2023 can include stiff inancial penalties for
companies under new obligations for supply chain due
diligence.
Disruption in Asia/Paciic
There are several potential lashpoints in the Asia/Paciic
region: the obvious one being the dispute between
China and Taiwan.
China will be watching the global response to the
Russian invasion of Ukraine very closely recognizing
that even large economies are not excluded from
international sanctions.
Perhaps more likely is the possibility of an escalation
in the highly contested South China Sea whether
intentional or accidental as well as potential disruption
to key trade routes in the region.
Weaponized interdependence
After decades of progress in globalization economies
have become interdependent.
Recent years have seen policymakers weaponize this
interdependence to improve their chances in trade
negotiations punish opponents in diplomatic disputes or
undermine rivals in geostrategic competition. For example
China reacted to Australian comments on the source of
COVID-19 by imposing tariffs on wine and shellish exports.
World food crisis
Less that 20% of household income in the US is spent on
food whilst in lower-income countries that amount can
exceed 50%
5
. A world food crisis driven by rising inlation
can cause an increase in civil unrest as we saw whe
the cost of grain and bread in Egypt contributed to the
Arab Spring.
6
4. EU Commission https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145
5. Household food spending divides the world. Financial Times. https://www.ft.com/content/cdd62792-0e85-11e9-acdc-4d9976f1533b
6. Use your loaf: why food prices were crucial in the Arab spring. The Guardian. https://www.theguardian.com/lifeandstyle/2011/jul/17/bread-food-arab-spring
Reducing the impact of supply
chain disruption
Recent global events such as port
congestion shortage of shipping
containers and haulage operators along
with a lack of infrastructure investment
have severely disrupted supply chains.
Managing these supply chain risks has
become a top priority with just-in-time
methods facing increasing scrutiny.
Andy Edwards
Director Global Marine
Charlie McCammon
Marine National Team
Leader at WTW
Indemniiable physical losses that occur because of
road trafic accidents theft of goods ire and natural
catastrophic events are covered by insurance. However
many supply chain disruptions such as delays fall
outside the parameters of indemniiable losses. This has
seen the development of new products such as trade
disruption insurance in the marine cargo market.
Many supply chain disruptions such as
delays fall outside the parameters of
indemniiable losses
Andy and Charlie set out 7 key ways that food and beverage
businesses can address supply chain disruption.
6 / Managing global risks and opportunities in the food and beverage sector
Managing global risks and opportunities in the food and beverage sector / 7
7 ways to keep your organization moving
1. Develop contingency plans
A supply chains resilience can be quickly
compromised if plans to deal with unexpected
disruptions are not in place.
To prevent the unexpected ask questions such as:
• How many links are in the chain?
• How long could we manage without our biggest
supplier?
• Do our existing suppliers have spare capacity or
business continuity plans in place?
2. Diversify your supplier base
Find suppliers who will be able to bridge the gap if
a supplier:
• goes out of business
• experiences a production issue
• lets you down in favor of a competitor
3. Consider re-shoring and near-shoring operations
Re-shoring and near-shoring is not always possible
in the food and beverage industry but by bringing
operations closer to home organizations can
mitigate some supply chain risk.
Re-shoring: returning production to the
companys country of origin.
Near-shoring: bringing production closer to the
original country.
4. Implement real-time tracking and visibility
Track the location status of your shipments in real
time to quickly address potential issues and build a
better understanding of your supply chain. Suppliers
can use food labels and upload data for full and
speedy traceability.
5. Foster strong relationships with logistics providers
Disruption can be managed better between
companies that share strong and healthy relationships.
This can help ensure you are treated more favorably in
the event of a scramble for scarce goods.
6. Utilize data and analytics
Review and analyze data on past disruptions
to identify patterns and develop strategies to
prevent future disruption. Using data can help to
continuously improve and optimize management of
supply chain risk.
7. Review insurance terms and conditions
Choose risk management and insurance partners that
fully understand the complexities of the food and
beverage industry to ensure you get the correct cover.
Environmental exposures
The increased public and political
awareness of the impact businesses
can have has resulted in an increase
in public expectation and regulatory
focus on environmental social and
governance (ESG) standards. This
continues to push environmental issues
up the boardroom agenda.
Chris Strong
Environmental Practice Leader WTW
Company directors now have an obligation to report
environmental impacts and show how their business
is managing their environmental responsibilities. Fines
and penalties are increasing in frequency and cost and
the reputational damage of an incident is far-reaching.
Biodiversity loss
Biodiversity loss is a key measure of ESG performance.
Food and beverage companies can have a direct and
indirect impact through:
• habitat loss and degradation due to land use
• overexploitation of natural resources
• water land and air pollution
• human-induced climate change
• Introduction of alien species
Figure 3 shows key aspects where the food and beverage
sector has a duty to mitigate environmental risks.
Chris gave an overview of the key environmental
exposures in food and beverage.
8 / Managing global risks and opportunities in the food and beverage sector
Environmental insurance policies
Standard general liability policies are limited in their
pollution cover. Biodiversity damage irst party cleanup
costs gradual pollution historical pollution crisis
management costs loss mitigation costs and statutory
remediation costs are not usually covered by general
liability or property policies. There is a broad spectrum
of scenarios of how environmental damage and pollution
arises from simple spills from tanks and pipelines
wastewater discharges odour mold historical land uses
air emissions and biodiversity damage.
Environmental Impairment Liability (EIL) insurance (as shown
on the right of igure 3) can help to reduce reputational
damage with the support of a crisis management team
to handle local press and residential queries. Speciic EIL
policies cover different types of pollution and environmental
damage from soil and groundwater issues to dust and
odor. Access to environmental consultants and lawyers can
minimize reputational damage and ensure your response to
an incident is rapid and correct.
Figure 3: Raising awareness of environmental risks
Managing global risks and opportunities in the food and beverage sector / 9
Maximizing the beneits of
automation and digitalization
Automation and digitalization continue
to revolutionize the food and beverage
industry giving businesses the
opportunity to optimize processes
through new technologies leading
to increased eficiency lexibility in
production and sustainaiblility.
Glyn Thoms
Head of Finex GB Cyber & TMT WTW
In our Global Food and Beverage Survey 2022 39%
of respondents identiied increased technology in
production as one of the key opportunities in the next 2
years. Research suggests that companies that fail to invest
face challenges around proit margins a shortage of
operatives and reduced output.
Key opportunities for the food and beverage
sector
Improved productivity and eficiency
Automation allows companies to maintain high output
rates because of the more reliable 24/7-nature of the
technology.
Automation also enables more eficient use of resources
and minimizing of waste.
Flexibility to adapt to customer needs
Digital technology allows producers to monitor and
control the production process.
Production can be scaled up or scaled back quickly
based on the data and analytics of customer demand
while companies can be more creative in launching new
products to market in a shorter timeframe.
Sustainability
With the increasing focus on sustainability digitalization
can help to lower emissions reduce waste reduce
energy consumption and provide better supply chain
visibility.
Glyn outlined how food and beverage businesses can
maximise the beneits of automation and digitalization.
Safer products and procedures
Customer and regulatory focus on food safety and
hygiene has increased. Manufacturers must control their
processes strictly to meet these ever-higher standards.
Digital technologies enable the detection and correction
of potential quality issues in real time saving signiicant
amounts of time and money. They can help with
automatic compliance checks and fast-track the recall
process.
Managing associated risk
Automation and digitalization can amplify exposure to
existing risks as well as create new ones.
Cyber risks as an example and the exposure to
ransomware attacks can impact the food and beverage
sector. Our WTW cyber claims data shows that the
manufacturing sector is now the second highest for
cyber claims frequency.
Managing risks effectively
Adopting a structured approach to risk management is
critical. Organisations should start with a detailed risk
assessment and analysis of key scenarios through risk
modelling. It is important to understand the potential
frequency and severity of exposure to decide which
risks to retain and which can be transferred through to
insurance – either through traditional lines or through
new products like cyber insurance. This covers liabilities
costs loss of revenue and provides access to a panel of
incident response experts to help manage the potentially
signiicant inancial and reputational impacts.
Managing product recall risks
The claims cost to recall remove and
replace products in the food and beverage
industry can be high. The impact of a
recall on a brands reputation cannot
be underestimated with social media
providing a platform for dissatisfaction to
potentially reach an audience of millions
within minutes.
Louise Dorrian
Head of Product Recall WTW
Allergens
Manufacturers must be aware of an ever-increasing list
of known allergens adjusting processing packaging
and labelling to ensure products are compliant with food
standards.
Prepared snacks and baked goods are commonly
associated with food allergen incidents due to the
number of ingredients complex supply chain and
methods of production.
Contamination
Contamination from salmonella or listeria develops from
poor hygiene within the manufacturing or storage process.
Leafy greens and vegetables that are processed without a
kill step tend to be the highest offenders in this category.
Louise gave an overview of how food and beverage
businesses can manage product recall risks.
10 / Managing global risks and opportunities in the food and beverage sector
External factors in increasing product recall
As well as the established risks such as allergens and
contamination a range of external factors have added
another layer of complexity.
Post-COVID environment
Many experienced personnel opted for early retirement
during and after the pandemic. Contract workers used
to meet short-term labor needs may not have the same
level of training in food safety which creates a higher risk
of production failure leading to potential contamination
and the need for a product recall.
Rise in inlation
To prevent passing on higher costs to consumers food
and beverage manufacturers are looking to source from
more competitive suppliers.
Managing global risks and opportunities in the food and beverage sector / 11
There is a risk that this can lead to suppliers cutting corners
to satisfy demand and maintain proitability. For example
we have seen an increase in instances of food fraud such
as peanut butter powder being used to bulk out cumin.
Conlict in Ukraine
The global supply of core and base ingredients has
drastically reduced forcing prices up.
The issue is exacerbated by the increase in fuel and
transportation costs and has a signiicant impact on
energy-intensive manufacturing such as glass bottling.
Implementing a suficient product recall
program
Product recall insurance works alongside sound quality
control measures to manage risk.
Review your product recall limits
Review your product recall limits to make sure they
continue to relect business growth and inlation.
Self-insured retentions or deductibles are key. Over the
past 9-12 months we have found insurers pushing for
increased retentions that maintain parity with the growth
in overall turnover of the cost of goods manufactured.
Brokers who specialize in product recall in food and
beverage can ensure you minimize prevent or negotiate
any potential increases while enhancing terms and
conditions in other areas.
Quantifying self-insured retentions
Product recall policies provide balance sheet protection
from catastrophic or large losses as opposed to more
manageable business risk and quality issues. Quantifying
a reasonable self-insured retention is usually done
using several determining factors such as daily output
average or largest batch value and the previous loss
history. Rarely would we recommend increasing a self-
insured retention purely to make a premium saving.
Insurers are extremely hesitant to reduce self-insured
retention once increased. Over the past few years an
increase in coverage extensions has been offered widely
across the food and beverage sector in the U.S. and
London markets. Many insurers will now agree to include
extensions such as carcinogens or mold and infestation
on select policies.
Ensuring recall policies are it for purpose
Ensuring your existing recall policy is it for purpose
especially regarding coverage could mean the difference
between a paid or declined claim. The average cost of
a food and beverage recall in 2016 was $10million
7
– a
crippling expense to any size of organization causing
cash low issues eroding proit and affecting the share
price. As a consequence manufacturers are insisting
that suppliers maintain a high level of product recall or
contamination insurance before trade starts.
‘The average cost of a food and beverage
recall in 2016 was $10million’
7
Figure 4: Is your product recall program suficient for
your needs?
7. More than money: What a recall truly costs https://www.fooddive.com/news/more-than-money-what-a-recall-truly-costs/426855/
Limit of indemnity
• When was this last
reviewed?
Self-insured
retention /
deductible
• Keep as low as
possible
Coverage /
policy
T&C’s
• Are there new
extensions
to consider?
POLICY
Business continuity and resilience
The food and beverage risk landscape
has changed exponentially in the last
three or four years. Extreme weather
events are expected to become more
commonplace while rising energy
costs environmental concerns and
geopolitical tensions have become
ever-present.
Frederick Gentile
Director of Risk Management WTW
Similarly the rise in cyber-crime driven by organized
criminal groups and even nation states disrupts critical
technology national infrastructure and personal
information to weaken society and interrupt commerce.
Business continuity management
Companies can manage risk using an international
standard such as ISO 22301 which provides a framework
for the planning and execution of business continuity
management.
Effective tools include:
1. Business impact analysis
Establish which processes activities and assets are
critical to the business. Assess how much it will hurt to
lose them and how long before the loss is irretrievable.
This will help you establish recovery time objectives.
2. Business continuity plan
Develop a plan that sets out what to do to minimize
disruption including who is responsible how and when
are actions taken and what resources are required.
Use playbooks or lowcharts to keep plans more
manageable and accessible.
3. Training and exercising
Test the plan through a desktop or live exercise to ensure
it works and that assumptions are correct. Follow up on
the learnings from the exercise.
Frederick expanded on how food and beverage businesses
can ensure business continuity and resilience.
12 / Managing global risks and opportunities in the food and beverage sector
Working with suppliers
Companies can develop stronger bonds with suppliers
through joint exercises and workshops to gain greater
visibility and involvement in business continuity
processes. Resilience questionnaires are good but
on-site visits to audit suppliers are better.
Vetting suppliers is crucial. Ideally vetting should be
carried out by a multidisciplinary team of procurement
resilience inance and production personnel.
Creating a dedicated and prioritized supply chain risk
register will help to truly understand the end-to-end
supply chain and to identify factory killers at lower
levels. The register should consider risks such as: raw
materials packaging cyber risk driver availability fuel
supply and tier 2 and tier 3 suppliers.
Supply chain software and modelling tools enable
effective scenario planning using analytical data to
create plausible scenarios that can stress-test the
organization.
WTWs supply chain risk diagnostic tool enables our
clients to understand their third-party risks and visualize
and prioritize alternative supply regions and ratings.
‘WTW’s supply chain risk diagnostic tool
enables our clients to understand their
third-party risks, and visualize and prioritize
alternative supply regions and ratings.’
How WTW can help
We work with clients in the food and beverage
sector to help them understand what their
potential losses could look like what scenarios
they should be concerned about and advise on
placement strategy.
Our analytics team offers powerful modelling
tools and systems to help businesses assess
risks and quantify probable losses. We also run
workshops to help clients identify their exposures
and tailor cover appropriate to their business.
Managing global risks and opportunities in the food and beverage sector / 13
14 / Managing global risks and opportunities in the food and beverage sector
Asia
Graham Edwards
Head of Sales & Client Management
Asia
+65 6958 2925
graham.edwards@wtwco.com
Australia and New Zealand
Trent Williams
Head of Broking Australasia
+61 423 598 493
trent.williams@wtwco.com
France
Franck Le Gall
West Region Leader
+33 5 56 00 00 08
franck.le.gall@grassavoye.com
Germany
Sylvester Lahmann
Head of Food & Beverage
+49 511 848591829
sylvester.lahmann@wtwco.com
Ireland
Ronan Doyle
Director - Head of Business
Development
+353 86 859 6288
ronan.doyle@wtwco.com
Italy
Paolo Molteni
Growth Director Corporate Risk and Broking
+44 20 3124 7775
paolo.molteni@wtwco.com
North America
Christian Ryan
North American Industry Leader
christian.ryan@wtwco.com
Spain
Lucas Ramos Fernández
Account Manager / Industries & Services
+34 91 154 91 52
lucas.ramos@wtwco.com
South America
Roman Mesuraca
Regional Head of P&C & Broking - LatAm
+54 11 4324 1195
roman.mesuraca@wtwco.com
UK
Simon Lusher
Global Food and Beverage Leader
+44 7436 049588
simon.lusher@wtwco.com
Sue Newton
GB Food and Beverage Leader
+44 7946 421507
sue.newton@wtwco.com
For more information please contact:
Managing global risks and opportunities in the food and beverage sector / 15
About WTW
At WTW (NASDAQ: WTW) we provide data-driven insight-led
solutions in the areas of people risk and capital. Leveraging the
global view and local expertise of our colleagues serving 140
countries and markets we help you sharpen your strategy enhance
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