Coca-Cola Amatil (CCA) is the largest bottler of non-alcoholic beverages in Australia. But with big operations come big risks:supply chain interruptions, natural disasters, business interruption, malicious tampering and transportation and production issues can all wreak havoc on even the most meticulously-run operations.
Mitigating such exposures is increasingly what big businesses are all about, and CCA is going to great lengths to protect its assets and minimise any losses, working closely with Aon across a variety of areas of business.
The relationship has been in place since 2007 and continues to go from strength to strength – indeed Aon even won the hotly-contested financial services category in this year’s CCA Supplier of the Year Award. Key players explain how this working relationship benefits both parties.
Rapid response
Coca-Cola Amatil’s swift response to addressing identified exposures at their Kewdale bottling facility in Perth earned them a top risk management award in 2010.
CCA’s leading property insurer, Vero, visits some 250 sites both in Australia and internationally each year and provides its clients with detailed risk reports. In the case of the Kewdale plant, Vero provided between 15-20 risk recommendations, which CCA went to great lengths to address as swiftly as possible.
The High Intensity Discharge (HID) lighting was swiftly replaced to reduce fire risk; fire suppression systems underwent maintenance; some chemicals were rehoused outdoors; damaged EPS panelling was repaired; and an external distribution site was recently completed in order to eliminate the risk associated with storing stock on premises given the existing sprinkler design.
“Exposure has been dramatically reduced,” explains Felix Riedl, CCA’s Manager, Risk & Insurance. “Within 4-6 months the bulk of therecommendations, around 75% of them, had been actioned and addressed.”
“Some of the fixes were quite simple and quick,” adds Michael Braude, CCA’s General Manager Treasury, Risk & Insurance. “They don’t take huge dollars to fix, but they still take someone’s time and commitment to make sure they happen. Insurers like that, so to win that award out of 250 sites visited is a good example of the risk mitigation work we’re involved in.”
CCA’s swift response to the Christchurch earthquake is further evidence of the importance placed on risk mitigation at the highest levels of the organisation. Their PET bottling production line was damaged and taken out of action. Stock was rapidly redistributed from Auckland, resulting in minimal sales being lost, other than in the red zone. Alternative storage facilities were also quickly identified, a crucial factor in business continuity.
“In Christchurch there was a loss of storage facilities for the stock, so everybody was in the same boat,” explains Aon’s Chief Claims Officer Mark Ronan. “CCA was very proactive and internally had protocols whereby they were able to identify other temporary storage areas very quickly.
“There was some profiteering by landlords who were insisting businesses sign up for 12 months, when they might only need it for three,” Ronan adds. “But because we’d gone through this process with CCA as part of an earlier simulation, we knew that in those circumstances, ifCCA was forced to pay for 12 months it would be covered by the policy.”
“If not for all that work CCA wouldn’t have been able to maintain that coverage in New Zealand. If corporates don’t take their insurance seriously, the market will just put them to the back of the queue.”
Simulating worst-case scenarios
"A real understanding of the potential impact that extreme events can have on the business is paramount,” explains Andrew Wearne,CCA’s Chief Risk Officer.
“Simulations can be expensive and resource intensive, and if they’re not linked to business strategy and enterprise risk, they can be mistargeted and viewed by the business as compliance exercises.”
For the past two years CCA has invested heavily in staging key stimulations that test processes and business continuity plans. The first, in 2010, studied the effects of the complete loss of CCA’s largest production plant, and this was followed up in 2011 with a simulation based on malicious product tampering.
These are significant events, being staged over an entire day, and have major cost and time implications, costing over $100,000 and taking two months to plan. As well as having Aon on the scene as a key adviser, CCA bring in other key players, such as law enforcement and members of the press to run simulated media reports. Any gaps in their coverage and processes are identified and can then be mitigated for in future real-life scenarios.
Aon’s Mark Ronan is in no doubt as to the worth of the ventures: “At the 2010 simulation on the loss of a production plant, after looking at all the logistical costs of what would be incurred in getting the business up and running after a complete shut-down, we tallied up all the costs and exposures from that and reconciled it back to the policy. That helped Aon in terms of ensuring CCA’s coverage was adequate,” he says.
“They require a lot of people, a lot of time and a lot of effort, but the simulations are very worthwhile. CCA has come a verylong way in terms of mitigating business interruption losses and implementing physical strategies.”
Michael Braude points out that they also showcase to insurers that CCA means business when it comes to mitigating risk. “The simulations are important in terms of the messaging for our insurers,” he says. “If something does happen, one of the things that gives insurers comfort is knowing that we are in the best possible position to react to it and to minimise the claim.
“We video the events of the day and share an abridged version of that with our insurers because it’s one thing to say we run training, development and simulations in this area, but another thing for them to be able to see our discipline and commitment to risk mitigation in practice.”
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