Commodity price top risk for food and beverage business

Commodity price risk is ranked Number 1 on a list of greatest risks faced by the food system, agribusiness and beverage industry, according to the 2009 U.S. Food System, Agribusiness and Beverage Industry Report.
The report, issued by Aon Corporation, is based on data from Aon’s Global Risk Insight Platform, 2009 Global Risk Management Survey, and other proprietary databases.
Price volatility is a tremendous concern and a sizeable risk for both sellers and buyers in food system, agribusiness and beverage companies, the report found.
These respondents also reported the lowest state of preparedness in regulatory and legislative changes (55%), cash flow and liquidity (57%) and economic slowdown (57%).
These areas are typically more complex, difficult to control, carry a degree of unpredictability and are enterprise-wide, according to survey respondents.
The top two risks with related losses in the past 12 months were commodity price (67%) and economic slowdown (43%), according to the report.
Aon notes many companies do not have comprehensive risk management processes in place, opting instead to rely on senior management’s experience or intuition.
“Food system, agribusiness and beverage companies rely on senior management’s intuition and experience as the primary method of identifying their major risks and are closely split between ‘intuition and experience’ and ‘business unit quantitative analysis’ as the most frequent method relied upon for assessing,” the report notes.
In terms of the most important external drivers to strengthen risk management, an increased focus from regulators is cited as the Number 1 catalyst for change, followed by economic volatility.