Falls and grain bin suffocation are definite hazards of the grain and feed business. Safety training and enforcement of confined space rules are very important approaches to risk mitigation. Al Tweeten, with Berkley Agribusiness Risk Specialists, states in a recent presentation on insurance risk control in the grain industry that focus on safety is perhaps one of the easiest approaches to managing risk and must be a priority. He feels that training should never have a day off and is everybody’s responsibility. As manager, you should give appropriate rewards for following the rules and you should dispense appropriate discipline for breaking them. Creating a culture around safety is important and in general having rules and training is not enough — it just takes a constant effort. OSHA has a reasonably informative page regarding safety in the grain and feed industry, located at: http://www.osha.gov/SLTC/grainhandling
Another risk management topic of current interest and concern is the recently enacted Food Safety Modernization Act signed into law by President Obama on Jan. 4, 2011, which includes some coverage for feed manufacturers (see http://www.fda.gov/Food/FoodSafety/FSMA), and for which the Food and Drug Administration (FDA) has oversight. Our intent is to devote a future Manager’s Notebook column specifically to dealing with this new law.
Insurance and contingency planning
The most common tool used to manage risk is insurance. Individuals and firms can purchase insurance for almost any situation. Pretty much anything that has a potential risk for loss or damage can be insured. Insurance works as we have mentioned above — funds from policy holders’ premiums are combined into an insurance pool. Insurance companies use statistics to predict what percentage of those insured will actually suffer a loss and file a claim. Claims are then paid from the insurance pool — with the balance accruing to the insurance company as profit.
Contingency plans are strategies your feed or grain business draws up in anticipation of certain events. They can cover any of the risks or possibilities that might occur to your firm: a competitor going out of business, a fire or flood, a product recall or contamination problem, the death or departure of an owner or key employee. How or whether you engage in developing these sorts of plans depends on your view of the severity of the impact of a particular event and the probability of it happening. The important point here is the conversation: It is far better to have considered a potential risk and decided that no action is required, than to not have the conversation and suffer the consequences when something unexpected happens with no contingency plan in place.
Key components of a contingency plan include a response phase focused on a quick and immediate response to an incident; a resumption phase which targets “getting back to work;” a recovery phase which allows for rebuilding critical infrastructure if destroyed by a disaster; and finally a restoration phase which implements procedures for normalized operations. A very detailed contingency plan template (meant for Federal Agencies — so some of the parts of the plan will not apply to the grain and feed industry) can be found at: www.csrc.nist.gov/groups/SMA/fasp/documents/contingency_planning/contingencyplan-template.doc.
This plan is worth looking at because it has some good, thought-provoking elements such as a “risk analysis matrix;” discussion of contingency plan contact information; an outline of “team staffing and taskings”; and suggests developing a succinct listing of all vendors and contractors that currently provide support or will provide support in a post-disaster environment, among other components.
Your insurance and your contingency plans are part of your risk management system — don’t just put them in a “safe place” and forget about them. Make it an annual commitment to review your risk management system and strategy and update it as necessary. No business is a static venture. Involve your employees as much as possible. They, more than anyone, can spot the flaws/gaps in your operation that can be tomorrow’s disaster.
Unavoidable yet manageable
There are lots of things that can happen in life and business and while we may not want to think about these negative outcomes and occurrences, it makes good business sense to carefully consider risks and prepare for contingencies. It may be instructive to engage professionals such as an insurance agent or a risk management specialist to assist with your strategies. A well-thought-out plan can definitely make your life easier should an unexpected disaster strike. Risk is unavoidable but it is manageable.