In 52 percent of the recalls, the cost of recalling the affected food products cost companies over $10 million. Another five percent of companies ended up spending over $100 million as a direct result of a recall, reports Food Safety News.
In the report, Swiss Re stated that the increasing number of food product recalls can be attributed to a combination of regulatory changes and an increasingly globalized food supply chain, which in itself make risk management all the more challenging.
Swiss Re notes another interesting issue with the U.S. population, and it is our growing sensitivity to pathogenic contamination and allergic ingredients in the food supply. This makes the problem of selling risky foods even riskier, the report says. And, along with the aging of the U.S. population, people are being diagnosed with food allergies at a higher rate than in the past.
The Centers for Disease Control and Prevention (CDC) reports that food contamination is costing health authorities $15.6 billion a year. In 2013, over nine million Americans were sickened by contaminated food, with more than 50,000 hospitalizations and 2,377 fatalities, according to Canadian Underwriter.ca.
In Germany in 2011, an E.coli outbreak affecting 3,950 people caused 53 deaths. The outbreak resulted in emergency payments by the E.U. of $1.3 billion to cover loses for farmers and the food industry.
While the cost to humans in health care costs resulting from food-borne illnesses is high, the cost to companies recalling contaminated food products is costly, also. Swiss Re notes in the report that these costs include “product disposal costs, business interruption, customer reimbursement, transport and investigation costs, external professional fees, sanitizing production facilities, warehousing costs and internal time and expense.”
As with Germany, other European Union countries and the U.S., there is the incalculable loss of a company’s reputation when a food product is recalled. The fallout over loss of business can sometimes be irreparable. This is when crisis management and communication comes into play to ensure that a brand can be saved and, more importantly, that food production is accomplished in a safe and sanitary manner.
In a statement, Swiss Re says that tools for risk-management and safe food production do exist. “They must be applied and adapted to ever more complex global markets and supply chains. Adaptation also means taking lessons learned to places where they are yet unknown, and tailoring them to local conditions. The experience insurers gather through their claims experience is an important resource for knowledge sharing for client companies.”
What is Swiss Re?
Established in Zurich, Switzerland, in 1863, Swiss Re is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. It has a global client base consisting of insurance companies, medium-to-large corporations and public sector clients, and deals directly and indirectly through brokers.
