Food and beverage businesses are often perceived as a poor property risk by insurers. In this article, we look at how risk engineering can improve risk quality and turn perceptions around.

Risk engineering is the process of identifying hazards and minimizing their potential to cause damage or disruption. In a challenging risk landscape, having an experienced risk engineer to provide advice and guidance is invaluable.

How is the risk landscape changing?

A history of large-scale losses in the food and beverage sector has led to the perception among insurers that food and beverage companies carry out dangerous activities and use hazardous materials, such as combustible panels in buildings, particularly in the construction of cold stores. Building regulations often only cover minimum standards and are concerned with saving lives, not buildings.

Logistics hubs and distribution warehouses are getting bigger and using automated storage retrieval systems more frequently. They are often very intensely packed, and companies may be storing larger quantities of dangerous materials, such as high strength alcohol, for longer. Protection systems, such as sprinkler systems, may not have been designed to protect such large premises, leaving companies exposed to risks.

If a fire does break out in one of these very large warehouses, it can be difficult to control and may result in devastating losses that disrupt the supply chain. As many food and beverage companies rely on “just in time” production, this makes them vulnerable to supply chain interruption.

How can risk engineering help you get ahead of emerging challenges?

Getting risk engineers involved as early as possible in new building projects and in reviews of your existing facilities and their protection systems is key to mitigating risk. Risk engineers can help with:

Designing and planning new buildings or protection systems: Risk engineers can work with you and your consultants and contractors to review and approve new build projects and protection systems at the design, commissioning and installation stages. Getting risk engineers involved early can help you demonstrate that good construction and controls are in place and meet international standards.

Challenging perceptions of risk: Involving risk engineers can help you challenge perceptions of risk in the sector, and present your risks to prospective insurers effectively, so that you get the best value.

Creating a risk engineering programme: Having a structured risk engineering strategy, that focuses on managing and improving your risk profile, will give insurers reassurance that you have controls in place and that they are not exposed to avoidable losses. A risk engineer can work in partnership with you to create a strategy.

Carrying out an independent risk review: A risk engineer can provide an independent review of your existing and future site operations and risk controls, and provide advice and guidance on loss prevention, risk control and implementation of recommendations from insurers. They can provide reports on the status of impairments and pick up on changes to factories, machinery and constructions that might otherwise have gone unnoticed.

Estimation of losses: Loss estimate scenarios calculated by a risk engineer can help make sure you are buying the right level of cover. Loss estimates can also guide change in your business by showing how spending on protection systems could reduce risks and the scale of losses.

Business interruption studies: A business interruption study helps you assess risks and build business continuity plans to minimise the risk of loss. Risk engineers can provide full business interruption studies covering outage periods, service level agreements and potential bottlenecks or dependencies in supply chains.

Conclusion

Food and beverage businesses face various challenges and risks as manufacturing methods change and storage and distribution hubs grow larger. By involving risk engineers as early as possible in site reviews or the design and planning stages of a new building or protection system, you can use their expertise to mitigate risks and challenge insurer perceptions.