General Insurance Article - Business interruption is top risk for food and drink firms

Almost half of food and drink companies (48%) said that business interruption was the biggest internal risk to their success, closely followed by supply chain risk (40%).

 That’s according to the 2024 Global Food and Beverage Risk Outlook, published  by WTW.

 Navigating turbulence and potential disruption has become the new normal in the sector, against a backdrop of global instability, conflicts, climate change and the cost-of-living crisis.

 Companies are understandably cautious in their outlook. More than 4 in 10 (41%) food and beverage companies feel the need to increase liquidity among their top strategic objectives for the next two years, giving them the financial firepower to manage through any further shocks. Other priorities include reducing costs (38%) and stabilising the business (35%).

 Additionally, companies are growing doubtful over their ability to keep pace with the rapid change of consumer tastes and preferences, named as a risk by a third of companies (36%). But this is also an area of opportunity, as firms pivot to take advantage of latest consumer trends.

 More than half of businesses (53%) said embracing sustainability and health and wellness was a leading opportunity. In comparison to 2022, there is less enthusiasm for plant-based meat substitutes and increased interest in gut health, nutrition and sustainable production among consumers.

 Despite challenges, food and beverage businesses are taking action to build resilience, with 47% reviewing their business continuity plans every six months and 31% quarterly. However, more than a quarter of businesses (29%) said their insurance includes damage to property only in the event of extreme weather, with no cover for business interruption, which is a key factor in recovery and resilience.

 Simon Lusher, Global Food and Beverage Leader at WTW said: “Many of the challenges food and beverage firms face today are of a different order from those they have overcome before. Geopolitical instability, conflicts and cost-of-living crises, alongside climate change, digitalisation and keeping up with the needs and wants of consumers is getting harder in a fast-changing world.

 “While our survey shows that businesses are taking steps to become more resilient in the face of these 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.”

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