Fonterra board sets up separate risk committee after review

Fonterra board to set up separate risk committee after food scare review

By Paul McBeth

Oct. 29 (BusinessDesk) - The board of Fonterra Cooperative Group will establish a separate committee to oversee risks facing the dairy group in the wake of the false alarm food scare that prompted a precautionary recall in August.

The company’s board will carve out the risk elements from its audit, finance and risk committee into its own separate committee, which chairman John Wilson said will cover “food safety, food quality and other risks Fonterra in today’s environment faces.”

The measure was one of a raft of recommendations from the board-ordered inquiry, led by Jack Hodder QC, after recall of three batches of whey protein concentrate, which were thought to have been contaminated.

Fonterra’s handling of the fall-out was “inadequate” for the kind and size of the crisis and the company’s lack of responsiveness to external stakeholders was seen as a “fortress” mentality, the report said.

“One of the most important steps Fonterra should now take is to use this opportunity to review and enhance both the substance and the style of its engagement with the people, organisations and communities that are important to it, to re-establish trust (where necessary) and to ensure lasting, mutually-beneficial relationships,” it said.

The report recommended the board accept greater responsibility for developing and maintaining relationships at the highest levels with its external stakeholders, and that it should review progress for the dairy group shedding a ‘Fortress Fonterra’ perception held by “a material proportion” of those groups.

On the operational side, the report supported management review food quality and safety specifications and testing to ensure they are ‘best in class’, strengthen crisis management, include reputational risk assessment when considering whether to escalate non-standard external scientific tests, amend plant cleaning programmes, and overhaul the way it deals with external stakeholders to shed the ‘Fortress Fonterra’ perception.

Wilson said the board is committed to implementing the recommendations, and will review progress in nine months’ time and then again in 18 months.

(BusinessDesk)

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