Friday, March 25, 2011

ERM-BE-COOP: Unexpected result


A headline from the Dow Jones News Service announces:

Global Food Scare Widens From Japan Nuclear Plant

The leed (cq) paragraph reads:

TOKYO (AFP)--Countries across the world shunned Japanese food imports Thursday as radioactive steam leaked from a disaster-struck nuclear plant, straining nerves in Tokyo.

In my enterprise risk management plans I normally include loss of customer base. Fortunately for me, that is sufficiently "generic" to cover just about everything.

In my own mind, I am thinking about competitors "stealing" customers, customers failing or changing direction, or simply going out of business "because" - because the owners retired and there was no one to buy the shop or the owners died and lacked a succession plan or . . .

I confess it never occurred to me that radiation exposure could destroy a market.

It should have occurred to me.

Remember "swine flu" when many ill-informed people stopped eating pork products?

How about the number of people who swore off beef for fear of Mad Cow disease?

Or, the folks who avoid all fish because some fish have high mercury levels.

There is at least a scare-a-day in the food industry.

Scares go beyond food products.

When Ford Explorers equipped with Firestone tires had more roll-overs than normal, tire buyers looked at brands other than Firestone . . . and SUV purchasers had second thoughts about Ford.

Toyota; need more be said?

The product need not be "bad" to cause the public to shun it.

It may simply be perceived as bad or substandard or dangerous.

When a plane crashes, airline management knows it can expect a brief drop in reservations and perhaps some cancellations.

Trouble on board a cruise ship? Expect management to offer perks to get people to suppress their fears and book a cabin.

Since food irradiation is being promoted in some circles - and strongly opposed in others - I am not certain food from Japan - and Japan's waters - should be avoided.

At the same time, I am not sure what type and what level of radiation may be on, or absorbed by, food products. Are there any counter-measures? Will carefully washing food products suffice? Until I have answers from people I consider authorities, I, too, may pass on Japanese food products.

The previous paragraph gives you a potential mitigation option.

Promulgate positive expert opinions that the product is safe - assuming it is safe.

Or, take the Johnson & Johnson "Tylenol" approach - announce a massive recall of the product until it can be proven safe. J&J may have lost some revenue from its Tylenol recall, but it probably gained customers and certainly gained respect for its bold action.

There are so many ways an organization can lose market share. Some, such as loss of customers due to perception, can be mitigated if not avoided.

Perhaps looking more at why customers might leave the fold will help my clients protect their bottom line.

No matter how loss of customer base is treated - generically or specifically - the threat is serious and must be included in all enterprise risk management plans if they are to be successful.

John Glenn
Enterprise Risk Management practitioner
Hollywood - Fort Lauderdale Florida

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