This month, Tiger Brands, the major food conglomerate in South Africa, is entangled in a major scandal. 950 have fallen ill and 180 people have died from listeriosis, which makes this the biggest food-borne illness outbreak in history.
In the unraveling of this scandal, I see a proof point for two growing trends:
First, enterprise risk management, although a relatively new industry and discipline, is globalizing. In the U.S., companies like Chipotle and Wells Fargo fail to tie their scandals to their shortcomings in risk management, while federal institutions cry out to label their failures as such. Similarly, Tiger Brands in South Africa has drastically mislabeled this crisis.
Second, the unstoppable power of the see-through economy is enforcing accountability for ineffective risk management worldwide. In the United States, we’ve seen PR take a backseat to the raw and rapid responses of social media users. In the case of Tiger Brands, we can see how PR is becoming less and less effective abroad, as well.
Tiger Brands Scandal Recognized as a Failure in Risk Management
This is Tiger Brands’ fifth scandal in 11 years. As we’ve seen with other repeat offenders like Wells Fargo, Chipotle, and Uber, scandals resurface when a company experiences a failure in risk management but fails to address it as such.
“Are the health procedures investigating various incoming products up to snuff?” posed Forensic Investigator Dr. David Klatzow. “We've known for a very long time that the procedures and processes which are supposed to protect the country against incoming contaminated material have not been up to snuff.”
Failing to address a known risk is negligence. Failing to identify and mitigate gaps in procedures is ineffective risk management. Allowing your consumers to suffer the consequences of your failure to implement proper governance and oversight is morally reprehensible.
The root cause of the Tiger Brands’ disaster is skewed priorities. The lengthy risk management section of its 2017 annual report ranks “Product Quality” last out of the nine risks to the business listed – behind cyber threats, business continuity, and even “risk of earnings decline from associates.” When your core competency is serving food, how could any risk possibly outweigh poisoning your customers?
Still, quotes like Klatzow’s bring some hope to this situation. The hope is that people’s mindsets are slowly but surely shifting to think about corporate missteps from a risk management perspective.
This mindset benefits all parties involved. For the business, the cost of risk management is far lower than the payout of a scandal between lawsuits and market devaluation. For the consumer and the investor, a company who practices effective risk management is seen as both a trusted provider and a sound investment.
See-Through Economy Will Demand Accountability for Tiger Brands Scandal
Even though South Africa’s Department of Health scientifically confirmed and definitively linked the bacteria to products made at Tiger’s meat processing factories, Tiger CEO Lawrence MacDougall tried the old playbook of PR distraction, shifting blame and pronouncing outright denial of responsibility by claiming there was no link between the outbreaks and Tiger Brands.
What has made this iteration of the Tiger Brands scandal more impactful than their 4 previous scandals?
The big difference this time is the power of the see-through economy, where Tiger’s press release is drowned out by the outrage of their customers and investors. The undeniable power of the see-through economy brought about by new technology that quickly links actions to outcomes through social media has given employees, customers, and investors a voice to be heard louder than any PR activity can counter. Thousands have taken to Twitter to voice their outrage over the Tiger Brands scandal and demand the brand take responsibility.
Based on my many years of experience in risk management, I predict this case will proceed down the very predictable pattern of failures in risk management. Evidence will be found to show employees knew about the conditions leading to the listeria outbreak, and shortly after a class action lawsuit by investors in Tiger Brands will occur citing Tiger Brands’ risk management negligence. Just a few weeks after the scandal broke, South African human rights lawyer Richard Spoor has planned a class action lawsuit against Tiger Brands on behalf of the families of people who died and those affected by the worst listeria outbreak in history.
A class action typically involves a large number of people who collectively band together to sue a person or company for damages. The see-through economy makes it easier for customers, investors, and other stakeholders to organize around their frustration with the lack of accountability they can now see and understand. “They must pay a price. It’s an incentive to them to act. Litigation like this encourages others to relook their norms and standards, because they know if they slip up they’ll pay,” says Spoor.
Tiger Brands stock is down 23% since the scandal unfolded, a US$1 billion-dollar loss in value. Organizations should take heed of Tiger Brands’ financial losses and the pain individuals and families have experienced. The only way to stay out of this kind of spotlight is to learn from the root cause of their wrongdoings and implement effective risk management.
This article was originally posted on LogicManager.com
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