Many of us have been faced with the process of risk assessment in our personal financial lives. Defining risk is a balance of how safe an investment is vs. how much it might pay out. There are many approaches, but the basic influences are the same: your attitude toward risk, your risk tolerance, and your capacity for risk. At the end of the self-examination process you hope that decisions have been made about your personal finances that reflect where you are now, where you want to be upon retirement, and how you are going to get there. It is far from an exact science, but it takes careful analysis of and reflection on your personal financial situation.

BALANCING RISK. Risk management for a bakery is much the same. You need to, first, define the risks – of which there are many: quality and consistency of incoming raw materials, opportunities for product adulteration during the manufacturing process, meeting of the quality expectations of your customer, and compliance with regulatory oversight. These risks are best managed through quality and food safety programs with components that touch these areas.

Risk associated with raw materials can be mitigated with third-party supplier audits, vendor-qualification programs, and material sampling with analytical testing. Prerequisite programs that are the foundation of any HACCP plan also can help you in identifying the risks associated with product adulteration. These include programs to remove hazards, such as screens, sifters, and magnets. A robust metal detector or x-ray program for finished-product goods provides a final quality screening before your product heads out the door to your consumer.

Defining, measuring, and controlling product-quality parameters can sometimes be one of the most challenging aspects of the production process.

Having well-developed product specifications that define key attributes for quality, using as many objective measurements as possible, helps to minimize the risk of not meeting customer expectations. These programs will generally require a culture of product quality with all employees to hit the targets throughout the process.

Compliance with regulatory mandates is perhaps the greatest risk that needs to be properly addressed. Regulations cover many aspects of bakery production, from the long-standing FDA regulations regarding production of safe food, to the more recent food facility registration, Food Safety Modernization Act (FSMA), and revised nutrition-labeling requirements. Failure to properly identify the requirements for your facility under these regulations, and have all appropriate controls and programs in place, can lead to very serious consequences. Events such as product withdrawal or recall, facility closure, or publicized injury to or illness of consumers can result in irreparable harm to a company’s reputation, client base, and, ultimately, the ability to stay in business.

SUMMARY. Just as with your personal finances, identifying the risk is only the first part of the process. The next step is to actively manage against those risks. Reach out for help. There are many resources through government sites and industry associations that will help you become educated on some of the programs mentioned above. Get training. Develop the skills of your staff. Bring in a consultant. In all cases, you must address the risks. To do otherwise, is like investing your own money into a pyramid scheme.

Brian Strouts, is VP of Baking and Food Technical Services, AIB International.