CHICAGO, Sept. 22 /PRNewswire/ -- The claims costs connected to the recent half billion egg recall will be unprecedented and include liabilities such as business interruption and reputation damage. During the next 15 months, the U.S. Food and Drug Administration will inspect the 600 largest egg production facilities, in response to the recall. From pet food to tomatoes, the frequency and severity of food recalls are increasing, prompting greater awareness among food system, agribusiness and beverage companies to insure against such events.
Aon Risk Solutions, the global risk management business of Aon Corporation (NYSE: AON), recently released its 2010 Food System, Agribusiness and Beverage report, which highlighted the need for food system, agribusiness and beverage companies to reduce volatility in revenue, stabilize earnings and control pre-loss and post-loss risk exposures in today's global marketplace. The report findings will enable organizations to benchmark their risk management and risk financing practices against those of their peers.
"An accidental or malicious food contamination crisis can have a devastating impact on a company's reputation, profitability, customer loyalty and employee retention," said Richard L. Shanks, national managing director of Aon Risk Solutions' Food System, Agribusiness and Beverage practice. "As recalls become more frequent, organizations must continually assess their risk exposures and develop extensive risk strategies to ensure that they are prepared for unexpected events."
According to the report, top risks faced by the industry include:
Many consumer-facing organizations overlook the impact suppliers may have on their public reputations. Recent financial security risk assessments conducted by Aon's Food System, Agribusiness and Beverage practice indicate that many suppliers' insurance programs will not respond effectively to significant contamination events. In addition, the vast majority of ingredient suppliers and importers have no coverage for their legal liabilities should a customer suffer a business interruption or reputation loss caused by a contaminated ingredient. Most companies have coverage for bodily injuries associated with a contaminated food, but the majority do not have coverage for the resulting loss of revenue caused by loss of consumer trust, damage to brand name or additional expenses associated with product contamination and recall.
Basic strategies to improve an organization's chances of recovery from a major contamination or recall incident include:
Pre-incident Planning: The first step in managing the risk of food contamination incidents is proper advance planning. Every company should have a well-documented and practiced product recall or retrieval plan, with a clear chain of command and communication. No amount of insurance can replace customer confidence lost due to poor planning and/or execution of a crisis or recall.
Crisis Management Planning: An appropriate crisis program goes beyond the pre-incident plan to coordinate all activities associated with a crisis. Team members may include the chief executive officer, general counsel, risk manager and representatives from security, marketing, public relations, quality control, human resources, distribution and manufacturing.
Visit www.aon.com/fab to learn about additional findings from Aon Analytics' 2010 Food System, Agribusiness and Beverage Industry report.
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Aon Corporation (NYSE: AON) is a leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 36,000 colleagues worldwide, Aon delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007, 2008 and 2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/unitedin2010 to learn about Aon's global partnership and shirt sponsorship with Manchester United.
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