LONDON 1 July 2005 – Companies in the food, drink and tobacco sector (FDT) are under-prepared for major business threatening incidents says a new survey issued today by Aon Limited, a leading risk management, insurance broking and human capital consultancy.  Whilst business continuity is high on the risk agenda for many FDT companies, with the majority having business continuity plans in place, few companies have actually tested these plans.

The importance of a strong corporate reputation is also well recognised within the sector, with surveyed companies ranking a loss of brand or reputation as the number one business risk faced.  However, 20% of FDT companies do not actively address this issue at board level.  Most were found to be equipped to manage day to day operations but there is little scenario planning for major, brand threatening incidents that could have severe financial impacts on these companies. 

New and emerging risks have also added to the risk challenge facing FDT companies. 65% of men and 56% of women in the UK are classified as overweight and, as concerns about obesity have increased, many FDT companies have developed ‘healthier’ product ranges.  Companies have also reconsidered the way they advertise to adults and children, yet consumers still tend to blame FDT companies for the adverse health effects of consuming their products. Recent cases of litigation against food and drink companies, have demonstrated the damage to brands that can be caused even though such litigation has largely been unsuccessful.  Aon’s report highlights that companies need to change the emphasis of their risk management alongside their new product development and marketing. 

Whilst considerable investment has been made in the area of health and safety since the joint Health & Safety Executive/food sector ‘Recipe for Safety’ initiative was launched in the 1990’s, figures from the HSE show that, on average, the sector still has the second highest injury rate of any industry and is almost twice that of the construction sector.  Aon’s report reveals that FDT companies do not consider health and safety as a major business risk yet they rank employer liability as a major concern and one that they want to transfer out of the business. The two are closely related, and in order to minimise the potential risk exposure, companies should ensure that health and safety issues are managed at the highest level. 

In addition to health and safety risks, the impact of other employee risks are often underestimated. The seasonal demand for skilled migrant labour in order to meet consumer demands brings with it a raft of potential threats to businesses.  Language difficulties, failures in communication and ethnic and cultural differences can leave FDT companies exposed should inadequate employee protection be provided.

Fire risk and its impact to companies financially, has been brought to the attention of the food and drink sector following a recent spate of fire incidents at sites throughout the UK.  Such events have led to temporary shortages of products whilst production levels are recovered and factories are rebuilt or replaced.  In these cases, the risk has often been amplified by the construction of food factories, which have put food hygiene concerns above fire safety. According to Aon’s report, this deterioration in the fire loss experience in the food and drink sector has prompted a number of insurers to reconsider their approach to underwriting in respect of these risks.

Commenting on the report, Peter Jackson, Managing Director, Consumer Products Group, within Aon’s Risk Services division said: “Given the number of threats that Food Drink and Tobacco (FDT) companies are exposed to through the supply chain, the sourcing of raw materials and in their contact with consumers, we are surprised to see the lack of planning and crisis preparedness that takes place within these companies.  Although companies may feel that they have appropriate risk management measures in place, our report shows that often the genuine threats facing these businesses are not being acknowledged at the highest level.”

“Due to the high profile nature of the FDT sector, risk management within these companies needs to be integrated across all functions. FDT companies are under continuous scrutiny from consumers and the media and when valuable brands and reputations are at stake, effective risk management cannot be taken lightly,” added Jackson.     

Copies of the report are available from Catherine McMenamin+44 208 612 5754 catherine.mcmenamin@ars.aon.co.uk

About Aon

Aon Corporation ( http://www.aon.com ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 47,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
 

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of regulatory investigations brought by state attorneys general and state insurance regulators related to our compensation arrangements with underwriters and related issues, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, and ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

Aon Limited is authorized and regulated by the Financial Service Authority in respect of insurance mediation activities only.

 

Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.