This will not be an easy task, but the first one will probably be the hardest, with following years’ having the luxury of adding up to date comment on each issue raised in the first risk assessment. So here is a summary of what we consider could be the seven most vital places to start looking for your information.
It is difficult to know exactly where to start, but taking these areas as separate indicators, they do all appear to have significant risks associated with economic vulnerability and the amelioration of fraud. The BRCv7 guidance notes, and every other guidance that has appeared so far; sheds little light on any best practice on how to do this and it is not a simple matter of just talking to your purchasing colleagues and reading the latest edition of The Grocer.
If reading this gives you an idea about any other indicators that are not included here, then please do add a comment or contact me by reply for a chance of receiving a £50 Amazon Voucher for your trouble.
# 1 – Use available commodity pricing data
Your purchasing colleagues will be paying for commodity pricing data from one of the business data providers, or will be subscribers to industry specific journals that provide pricing data and trends. Talk to them, and find out which commodities, that are relevant to your business, have gone up in price significantly. Find out if this was unexpected and find out what their concerns are about it.
# 2 – Pull out that stack of Grocer Magazines gathering dust in the sales office
There is no point in looking in the jobs section, technical jobs are in Food Manufacture. Every week there is a very useful page provided by Mintel, which highlights issues related to food commodity prices or shortages. These can be very insightful and if any of these resonate with your field of products, then add these to your risk assessment.
Similarly if they are definitely NOT risks for your area, then note that too, as an insignificant risk.
#3 – Talk to purchasing, find out which ingredients have availability problems
There are many reasons for availability problems and difficulties of sourcing, which you will already be familiar with. But these are certain economic vulnerabilities, with a propensity to be fraudulent, and may carry quite a high risk.
Here are some of the biggest culprits:
- A Poor harvest of X in country Y now means that suppliers are struggling to supply the volumes your business requires.
- China starts importing vast amounts. What does this do to price?
- A country restricts exports. For what reason? Will others follow? Is it Political?
- Economic sanctions against Iran, Russia, or some other country impacts availability. What is the likelihood of this changing – or getting a whole lot worse, as world supplies are harder to source.
# 4 and 5 – Suppliers look for price rises
Whenever suppliers come looking for price rises, the justification for this may be an indicator. If you have a number of suppliers in a category and most of them are talking price rises, but one is not; find out why this supplier is not looking to pass on a price increase.
If no one is talking price rises right now, it is still a risk, albeit a lower one, but unexpected price rises in 3 months could be devastating. State this too.
# 6 – Supplier review meetings
Ask suppliers during review meetings to give an update on what’s happening in their sector, what adulteration & substitution risks exist, and what shortcuts are the cowboys in the sector taking. Reputable suppliers will be happy to help, those who are less reputable will be uncomfortable.
This is a potential time-bomb in the vulnerability risks, and could have significant opportunities for fraud.
#7 – Prices too good to be true
Every food business is under pressure to increase margins, if a supplier comes along with a price that substantially undercuts existing suppliers, it could be too good to be true. Tread carefully and do extensive due diligence, including supplier audits.
Don’t let the cost of auditing the supplier deter you. If the savings are worthwhile you may even be able to get purchasing to pay for the audit from their budget. The risk of it being fraudulent may be noted as possibly high, and the impact of this would certainly represent an economic vulnerability risk.
There you have it
All of these indicators can be built into your risk assessment and will go a long way towards giving you a robust risk assessment of economic indicators. Dont forget an insignificant risk is still a risk, and ought to be noted. Other parties who have risks, can also become your risks, if they have an impact on your economic vulnerability.
But there is a silver lining to this veritable cloud….. It may improve the working relationship with your purchasing colleagues.
Don’t forget to let me know of any other indicators you think of for a chance of a £50 of Amazon voucher.