How Audits Add Value and Enhance Governance

Every year, hundreds of thousands of food safety audits are conducted around the world. Probably a lot more. Does anyone believe that companies spend so many human and financial resources simply because they have to? Is food safety auditing a low-value-added activity that only assesses compliance because enterprises must in order to do business?

It undoubtedly adds value and enhances governance!

Our experience shows that value is created when certain conditions are met. We have worked with the audit organizations of leading food and beverage companies as well as external audit organizations for several years and have concluded that value creation occurs when they consistently do seven things:

  1. They regularly monitor, analyze, evaluate, and review the context in which they operate in order to identify all stakeholders, determine their needs and expectations, and assess the potential impacts on the audit organization’s performance.
  2. They develop, implement, and communicate the mission, vision, and values of the auditing organization.
  3. Their leadership establishes clear goals and fosters an aligned culture within their  organization.
  4. They identify and manage the resources necessary to achieve their objectives. People, financial resources, organizational knowledge, information, technology, and externally provided resources being just a few examples.
  5. They manage their audit process with rigor and agility, beginning with the development of audit program objectives and the audit program itself and continuing with reporting and audit follow-up.
  6. They set performance goals for themselves and then analyze and evaluate their results.
  7. Finally, they use performance evaluation to encourage continuous improvement and innovation through learning.

This is how audits add value to the business, but successful audit organizations go above and beyond. They recognize that food safety auditing entails more than simply determining compliance. Leading audit organizations leverage their capabilities to create more value to the business. Here are three examples of how they do it. They do so by:

  • Playing an important role in mergers and acquisitions as well as supply base decisions through due diligence audits.
  • Performing pre- and post-launch audits to help the innovation cycle.
  • When issues arise, deploying their expertise to the front lines of problem solving.

Let’s start with due diligence audits and some uncomfortable truths… CEOs in the food industry understand that providing safe food and protecting consumers is their primary challenge and focus. Meanwhile, most companies devote less than 2% of their due-diligence efforts to food safety issues, according to a 2018 SSAFE document co-published with Accenture on how to manage food safety in mergers and acquisitions. Another study conducted in 2019 by Deloitte revealed that half of survey respondents’ mergers and acquisition deals failed to generate the value they expected, with 23% attributing this to insufficient due diligence. All of this indicates that food safety auditing is an important part of mergers and acquisitions, and that there is still room for improvement.

A best-practice food safety due diligence process, according to the SSAFE document, should enable early risk awareness, the right level of expertise, clear checklists and documentation, facility visits, and a seat at the decision-making table for food safety leaders. The process, as detailed in the guidance document, should be divided into three stages: pre-selection, due diligence assessment, and decision.

  • Pre-selection: This is the preliminary stage, which is frequently based on financial and commercial considerations. Best practices suggest that the most appropriate and experienced food safety resources should be aware of the due diligence’s intent.
  • Due Diligence Assessment: Choosing expert, senior resources to conduct food safety due diligence is critical. These resources should request and review food safety documentation from potential acquisitions using detailed, end-to-end, and tailored checklists. They should also visit the potential acquisition’s sites to see the facilities for themselves and compare conditions to expectations. The formal report on their food safety findings should focus on major risks. and incorporate associated business impacts with costed mitigation actions.
  • Decision: Food safety leaders should sit at the decision-making table in order to explain and convey the severity of their findings and to assist business leaders in understanding the likely impact on future operations.

Leading audit firms leverage their expertise and add value to the business by participating in the various stages of the due diligence process. Food safety audits definitely help to improve governance in this area.

Here’s a second example of how leading audit organizations leverage their capabilities to add value to the business: they conduct evaluations both before and after the launch of a new product or initiative. They use their food safety audit resources to perform a health check on the Stage and Gate process and its four major phases: Discover, Define, Design, and Deliver. They can do it ahead of time to ensure that food safety is indeed designed in and, if necessary, take appropriate actions to improve the robustness of the processes and the product. A pre-launch preventive review aims to achieve this. They can also do it after the product has been released in order to improve it further or in response to market issues. Leading audit organizations include pre- and post-launch reviews in their standard processes and audit trails.

Here’s the third and final example of how leading audit firms use their capabilities to add value to the business: they bring food safety auditors to the troubleshooting table. When it comes to problem solving, an auditor can be an important multidisciplinary team member. When food safety issues arise, corrective measures must be implemented to address the underlying cause (s). When engaged in troubleshooting activities, experienced food safety auditors have the ability to make a difference at all stages of a corrective action program, not just where they have traditionally done so. Individuals involved in troubleshooting learn from the case, and auditors are well positioned to share the knowledge gained with the larger community while auditing other organizations.

Food safety auditing is a critical program that creates value; it is an activity that should go beyond simply evaluating compliance, and it is a key driver for continuous improvement. This, however, can only be accomplished if the audit program is properly designed, focuses on the important aspects, and is continuously improved.

By Marc Cwikowski
November 3, 2022

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