risk management is now a boardroom issue
Australia’s food manufacturing sector is a dynamic and high-stakes environment. From contamination events to supply chain fragility, bakery, confectionery, frozen food and ready-meal producers all operate in an environment where one misstep can hit margins, brand value and customer trust.
The sector has always been competitive, but the risk landscape has become more complex.
Shifting consumer preferences, the effects of climate change, and growing reliance on technology means producers are juggling more moving parts than ever before.
The reality is clear. Resilience is no longer just an operational concern, it’s a boardroom issue.
Key operational risks facing food producers
Product contamination and food safety failures:
Food recalls remain one of the most serious threats. Undeclared allergens, mislabelling, or improper storage can all trigger recalls that cause financial loss and reputational damage.
In 2024 alone, FSANZ recorded 95 recalls (opens a new window), with many affecting ready-to-eat meals and confectionery. Traceability systems, strong supplier controls, and HACCP protocols are no longer optional, they’re essential.
Risk management tip: Build robust traceability systems and conduct regular supplier audits. Don’t just rely on paper trails - test your recall processes under real-time conditions.
Supply chain disruption:
Australian producers know the pain of ingredient and logistics disruptions.
Wheat imports, packaging delays, or frozen meal transport issues can halt production.
With global trade under strain and weather events becoming more severe, securing supply has never been more challenging.
Diversifying suppliers, dual-sourcing critical inputs, and investing in real-time tracking technology can provide much-needed resilience.
Risk management tip: Map your entire supply chain - not just Tier 1 suppliers. Pinpoint bottlenecks and secure essential ingredients from a minimum of two separate suppliers.
Equipment breakdown and business interruption:
Industrial kitchens, chillers, packaging lines, and storage systems are capital-intensive. A single breakdown can halt production and wipe out profitability.
Preventative maintenance and well-structured business interruption cover should be front of mind.
Too often, insurance programs only cover asset replacement but not the lost revenue and contractual penalties that follow downtime.
Risk management tip: Implement preventative maintenance schedules and align your insurance cover to include both asset replacement and business interruption.
Employee safety and compliance:
Production lines bring significant WHS exposures: burns, cuts, slips, repetitive strain injuries, and chemical exposure.
Beyond the human impact, these incidents can result in claims, fines, and lost productivity.
Regular safety audits, training, and embedding a strong safety culture are key to protecting people and operations.
Risk management tip: Schedule regular WHS audits and invest in continuous training. Insurers view a strong safety culture favourably, which can also support better premium outcomes.
Environmental liabilities and climate risk:
Improper waste disposal, refrigerant leaks, and emissions not only attract fines but also damage community trust.
Climate change has magnified this challenge, with floods, droughts, and severe storms disrupting both crops and logistics.
Producers that invest in sustainable practices and build resilience into their operations are less exposed to regulatory and reputational fallout.
Risk management tip: Invest early in sustainable practices and monitor emerging environmental regulations.
Consider how your insurance program addresses environmental impairment liability.
Cyber risk:
As factories become more digitised, new exposures emerge.
IT systems now control temperature, storage, and even fire suppression.
A cyber breach in these systems could spoil stock or halt operations.
Protecting against this risk is not just about firewalls and IT - it’s about culture, training, and ensuring cyber resilience is part of continuity planning.
Risk management tip: Conduct a cyber risk assessment specifically for operational technology (OT). Train staff on cyber awareness and integrate cyber incidents into your business continuity planning.
Why risk management belongs in the boardroom
Risk Management is not about slowing growth; it’s about protecting it. Consider one recall incident can permanently damage consumer trust.
One uninsured breakdown can wipe out a month’s margin.
One cyber incident can expose data and halt operations overnight. When these risks are ignored, the financial and reputational damage can be long-lasting. When they are managed strategically, however, producers can safeguard their margins, protect their brand, and even negotiate stronger commercial contracts.
Turn risk awareness into a competitive advantage
Food producers that actively manage risk and maintain robust insurance coverage are better positioned to:
Meet retailer and regulatory requirements
Recover from unforeseen events faster
Protect brand value
Negotiate stronger contracts with commercial partners
As a decision-maker, reviewing your risk exposure annually and aligning it with tailored insurance cover is one of the most valuable steps you can take to future-proof your business.
Next step
Speak with a specialist food industry insurance broker to review your current cover and identify gaps.
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content in this publication.
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