The Asian agribusiness supply chain – incorporating agricultural production, supply and retail – is facing an unprecedented array of commercial risks, as head of Lockton Companies Asia Peter Jackson tells StrategicRISK
Environmental, production and distribution risks are nothing new when it comes to getting produce from the “paddy to the plate”, Jackson says, but the industry must adapt to less manageable and more unpredictable risk scenarios.
“Paramount among these is the public scrutiny of safety standards, business practice and ethical conduct,” he says.
“Following a number of high-profile incidents, consumers, the media and the authorities are now paying close attention to business practice.”
While food safety has been the focus of much of this attention, Jackson argues that it is just part of a developing trend.
“Practices such as land clearance, and the resulting haze and air pollution, have also had their time in the spotlight,” he says.
“As a result, agribusiness insurance has become a lot more complicated, and now needs to incorporate high degree of flexibility.”
Safety and environmental concerns are not the only areas of increased risk for agribusiness operations.
“Recent media coverage has focused on sugar content in drinks and the rising levels of childhood obesity in high-growth markets,” he says.
“Globally, this is nothing new. But in Asia it is still unclear how consumers will react to local-level media coverage and changing health trends.”
This uncertainty increases the need for food producers and retailers to respond to local-level events and concerns quickly and decisively, Jackson advises.
“It seems that crisis management has now become the ‘new-normal’ for companies in Asian agribusiness,” he says.
“Until major structural, and possibly regulatory, changes are made, we will see ongoing growth interrupted by regular dips as consumers respond to a range of scenarios.
“Insurers and businesses will need to prepare for both the direct (internal) and indirect (external) impacts of these incidents.”
To further complicate matters, it is now clear that incidents that affect one company can have a detrimental impact across an entire product line.
“It is almost the case that companies have to insure against the risk of their competitors performing poorly,” Jackson says.
Manufacturers in the supply chain need to accept there is only going to be more scrutiny from customers, he adds.
“Cutting corners may save money in the short term but, once exposed, irresponsible or careless practice damages the whole industry,” he says.
“Peer group pressure to apply consistent industry standards will work as well as any regulation.
“One obvious way for the agribusiness industry to reduce the number of high-impact incidents is to work together more, sharing data, best-practice and key learnings.”