Editorial: Risky Business

By Len Monheit

Benjamin Franklin observed: “In this world nothing is certain but death and taxes.” Even the best business planners can presumably only anticipate and manage at about an eighty percent rate when confronted with strategic planning challenges and contingencies – that’s all that’s certain. Is there a business corollary that presupposes that the other twenty percent is fraught with risk and uncertainty?

How many companies, outside of those actually in the insurance industry, really have a strategy for risk and exposure analysis? More importantly perhaps, how many companies have taken adequate steps to minimize exposure? If one is judging by recent news and events, and ongoing systemic issues, not many. Sure, we see corporate reports which talk about mitigating factors and business uncertainties, but inevitably they do so as if these were issues over which they had no control, no influence, and with no potential impact. They typically, in this matter at least, portray themselves as victims of market, government, weather, war, and the practices of others. We know intuitively that the reality is more complex, but one might presume, though, that business risk mitigation, to some extent, is logical, practical and economically beneficial.

Where things get complicated is where the line between industry risk as a collective, begins to blur with corporate risk for individual companies.

How else can one explain our lack of a self-policing and monitoring system as an industry, our ‘collective’ reluctance to stop doing business with companies who probably shouldn’t be in our industry, and our apathy to many of the happenings in the world around us? Whether it’s the consumers who face us, the downstream clients who rely on us, or the industry bell-weathers who support, encourage and yet frustrate us as they talk about responsibility and the ‘future’, our filters are frequently on as we ignore the risks to our livelihoods and proceed ‘business as usual’.

I was struck by a headline late last week that observed ‘Food Companies Take Prudent Measures’, as several small and medium sized food companies began ratcheting up testing procedures and quality control measures in light of the pet food quality issues and its sourcing and testing implications. As it turns out, legislators have already been quoted saying they know the issue pervades not only pet foods, but foods in general and into the dietary supplements category. While I haven’t actually heard any supplement company talk about the prudent measures it is taking, I can only hope this is so. For too long it’s been a case of ‘we’ll do it when we have to’, a strategy that defies all risk management logic.

Whether it’s melamine or any other impurity, the risks inherent with this lack of control and ultimately lack of responsibility for all material inputs could be catastrophic at both the corporate and industry level. Yet, this type of risk doesn’t seem to be taken as seriously as things such as the potential for unfavorable regulation, and other corporate efforts. Certainly it frequently doesn’t translate into buying and trade practices; and there are instances where the unscrupulous in supply take advantage of buyer ignorance, promising things their products can’t deliver, or offering at best, an uncertain regulatory or intellectual property status that adds business risk to both buyer and seller

Having said all this, it must be noted that many companies continue to develop solid value chain relationships with organizations with good products, and willingly invest in mechanisms which indicate a commitment to not only doing things ‘when we have to’. This can only become increasingly important as the US supplement market gets ready for the long-awaited Good Manufacturing Practices final rule.

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