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Risk management plays a pivotal role in the success of modern-day organisations. From minimising and controlling some risks to attempting to foresee and remove many others, businesses are constantly using risk management to protect themselves from possible threats. In this paper the use/misuse of risk management within the food industry in Ireland and the UK following the infamous horsemeat scandal of 2013 will be examined. The motivation for choosing this topic was the wide scale effect which it had on consumers.
The shock it commanded from the general public and proposed the question do we really know what we are consuming.
“Worst cases happen with some regularity- the Hindenburg, the Titanic, the New Orleans levees, Wall street banking-they fill history books and daily newspapers, each of these mishaps managed by the brightest kids in the world, too smart and too big to fail”. When news of the horsemeat scandal broke in 2013 this was most certainly the case for several supermarkets, especially in Ireland and the UK.
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Horse DNA had been discovered in several frozen burgers labelled as ‘beef’. Consumers were outraged at the possibility that they may have consumed a so called ‘beef burger’, and they wanted answers. The food industry simply wasn’t prepared for this event to occur. In a world where consumers want the highest quality products at the lowest possible price, cutting corners was always likely (perhaps certain) to occur. “The speeding up of modernization has produced a gulf between the world of quantifiable risk in which we think and act, and the world of non-quantifiable insecurities that we are creating.
” It is simply unforgiveable however, to suggest that this scandal which caused severe damage to the food industries reputation wasn’t preventable or even predictable. Loss exposures should have been identified earlier and remedies to these should have been established. Operational risk threatened the industry as food safety practices simply weren’t adhered to. The effect which this scandal had on the food industry was significant. “The horsemeat contamination scandal in winter 2013 in the UK resulted in over ten million burgers taken off the shelves by major UK retailers such as Tesco, Iceland and Lidl”.
The horse meat scandal can easily be regarded as one of the biggest risk exposures faced by modern food retailers and distributors. The entire fiasco raised huge questions regarding the tractability of food but also made us as consumers want answers and accountability for how we were let down by the food industry. Food processors for example Silvercrest, based in County Monaghan, Ireland, were quickly noted as a prime company involved in the ordeal. Large retailers including Aldi and Tesco acted quickly by terminating all contracts and dealings with the now infamous firm. The direct losses were mainly felt by food processers but undoubtedly the consequential indirect losses impacted street retailers. The retailers who sold products containing horsemeat adopted a loss reduction approach. All foods containing horsemeat were immediately recalled with a full monetary refund given to affected customers. A rapid crisis communication strategy was also immediately implemented. Notices were placed in newspapers and shops apologising to those affected while resolutely promising to resolve the embarrassing situation. The immediate blame of Silvercrest and food processors abroad was a clever risk management tactic used by retailers to avoid being held fully accountable. “There is a dialectical relation between the unequal experience of being victimized by global risks and the transborder nature of the problems. But it is the transnational aspect, which makes cooperation indispensable to their solution, that truly gives them their global nature”.
The involvement of different countries with different laws and standards heightened the need for transparency and effective communication. The aforementioned deflecting of blame lessened the direct impact felt by retailers. Richard Dodd a member of the British Retail Consortium, told the BBC: "What we're hearing from our members is that this horsemeat issue is not having an impact. People are clear that it isn't a health issue, so it's not producing a change in customer shopping habits. " In the months after the scandal reports published illustrated the impact of losing the trust of customers resulting from risk exposure. The Irish Examiner published an article stating that Irish butcher shops had recorded a 20 per cent increase in sales as a result of the defamation of the larger retailers. This is an example of an indirect impact which is almost impossible to quantify in the wake of a huge risk management failure. Post horsegate food fraud is high up on the list of risks being monitored by firms. Barnett et al. (2016) demonstrates that the biggest impact of the horsemeat adulteration was the reduced confidence and trust in processed meat and the stores that supplied such products. The main problem for consumers was the omission of accurate labelling of meat products and the deceitful process that misinformed consumers. It was morally intolerable. Approaches to combat this damaging public image and the risk of contamination happening again are advance product traceability, develop transparent and accurate labelling including the origin of meat source. Tesco now issue data online regarding their meat testing control, this can be seen as a means of repairing the harm to their reputation.
An investigation carried out by professor Elliot of Queens University Belfast discovered that the UK food industry has made a remarkable advancement of ensuring our food was safe for human consumption but have neglected the need to safeguard against the risk of food fraud. Firms need to practice a zero-tolerance approach towards their meat suppliers. Brooks et al. (2017) alludes that pre horsegate the meat industry would perceive cutting corners as typical procedure such as labelling beef from Poland as British beef. The horsemeat scandal could have developed because of risk creep. A number of establishments in the UK have been set up to help combat the risk of food fraud such as the National Food Crime Unit. A system known as the Food Industry Intelligence Network was set up after horsegate as a means for member companies to share undisclosed knowledge and test outcomes which enhanced their risk management strategy. In conclusion, risk has a very important role in businesses today with regards to their success. Organisations take part in controlling, protecting, minimizing, removing, foreseeing and continuously managing risks. However, this was not the case with major food retailers and suppliers as the horsemeat scandal arose. The food industry was unprepared and had taken short cuts with quality check and traceability. They would label beef from Poland as British. As we have learned, there were both direct and indirect losses. Food processors lost their contracts with retailers, while retailers lost customer value etc. Tesco now include details of meat testing on their website. The loss reduction approach was used by retailers. Refunds were given to customers. Notices were put in newspapers through a rapid communication strategy to apologize and they made promises to sort out the problem. Tesco and Aldi blamed food processors abroad using a risk management tactic. Irish and UK retailers had no idea about the types of meat used in the making of their ‘beef’ burgers but should have had better communication. Some customers believed that Tesco and Aldi did nothing wrong and so the horsemeat scandal did not change customers habits. However, post horsemeat scandal reports were made which talked about the results of lack of trust and lowered confidence caused by this risk exposure.
Butchers’ sales increased. Since the food fraud, this is now the most important risk being monitored by companies. The investigation carried out on the UK food industry showed an improvement on making sure the food was safe however, they still didn’t show concern about needing a guard against risk fraud. Agencies and systems have been set up and put in place to tackle fraud and improve their risk management strategies. Therefore, risk management plays a huge role in modern organisations as discussed through the recent meat scandal in 2013.
The Horsemeat Scandal: a Case Of Misuse Of Risk Management Within The Food Industry. (2024, Feb 21). Retrieved from https://studymoose.com/the-horsemeat-scandal-a-case-of-misuse-of-risk-management-within-the-food-industry-essay
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