Planning for a crisis

By Mark Harrison - January 16, 2019

Businesses can learn from the recent experience of fruit growers and horticulturalists after the needle-in-strawberry crisis. The series of events at grower and retailer level were covered extensively in the media, and should be a wake-up call for all businesses to assess, consider and prepare to manage risk.

Read: Contact Magazine Summer 2018/19

Australia’s $500 million strawberry sector recently experienced the kind of crisis many businesses don’t think to plan for. A widely publicised contamination issue involving needles in fruit triggered an overnight collapse in domestic strawberry markets. Major supermarkets either cancelled or reduced orders, while strawberry exports also stalled. The crisis will likely devastate some businesses and there will be long-term impacts on horticultural producers and how they mitigate such risks.

For the wider business sector, what does this all mean? At a minimum, it reminds owners and managers of the importance of having an effective risk management plan. Typically, this includes a process of identifying potential risks, assessing their likelihood and potential impact and implementing policies to mitigate their risk to an acceptable level. In the event something occurs, the business should also have monitoring in place to identify a risk or event as soon as possible after it is triggered, and a response plan to react quickly.

Benefits of risk management planning

Often cynically viewed as a compliance matter or box-ticking exercise, if undertaken effectively the process can create value for an organisation beyond minimising damage to a business’s reputation or revenue when a risk is realised.

An effective risk management program can have a broad and positive impact including:

  • giving owners greater peace of mind as to the security of their business/investment as by definition, risks will be reduced, or at least easier to spot
  • creating enterprise value (the tangible, money in the bank kind) by removing a future acquirer’s risk perception of your business
  • potentially producing operating efficiencies and a leaner business by identifying and removing complex, riskier and often manual processes
  • allowing business owners to focus on value creation, rather than working in the business and responding to issues, as the process should mitigate many of these occurrences. Owners may even be able to step away from the business more often
  • supporting a proactive culture, as managers are focused on outcomes, and achievement of such, within the safety of an operating framework

These advantages alone should prompt the adoption of an effective and meaningful risk management plan.

First steps towards risk management

In order to adequately safeguard your business in the event of a crisis, there are a number of factors that should be considered immediately, at a commercial level.

Insurance: Is your insurance adequate to address an event of this nature? A range of possible covers exist, from loss of profits, recall cover, key person insurance and fraud protection. Ensure you have considered each and understood the terms of the cover.

Action Plan: Do you have a plan of action ready to implement immediately following a disaster event? While hopefully never needed, a plan of what to do, who to call and how to contact the whole organisation is critical.

Resources: Do you have the resources to leverage in the event of a disaster? Monetary resources are the obvious need, whether in the form of undrawn facilities or a ‘rainy day’ reserve. But consideration should be given to people, their ability to respond quickly, their skills, and their proximity to an event.

Relationships: How strong are your relationships? In the event of a disaster the ability to seek support, understanding, and flexibility from suppliers or customers is critical to managing the stresses of the situation and maintaining an ongoing commercial relationship during and beyond the event.

Reputation: Who is in your corner? Brand and public perception of your business will be impacted in many scenarios. Knowing what to say, and how to get your view across in public will be critical to preserving your goodwill. Consider establishing a relationship with a public relations expert that can be activated immediately.

While your business may never face a crisis of the proportions experienced by growers during the recent needle-in-strawberry crisis, it would be remiss of any organisation to believe that a situation on this scale could never happen to them. Businesses should assess their risks immediately, and put the appropriate processes and insurance policies in place, in order to protect hard-earned assets, valuable staff, and cash flow, and ensure the longevity of the business and brand.

For additional advice regarding risk management, speak to your Pitcher Partners contact about protecting your business.


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