IJCA - Volume 3 - Flipbook - Page 50
48 The International Journal of Conformity Assessment
Food Safety: An Essential Aspect of Due Diligence
By Lisa Jo Lupo, Director of Communications, The Acheson Group | DOI: 10.55459/IJCA/v3i1/LJL
-ABSTRACTThe investment in a food company is an investment
in its brand and consumer trust. Ensuring a solid
investment means including a full food safety
assessment and inspection in the pre-investment due
diligence. This assessment focuses on evaluating
the company’s regulatory compliance, operational
practices, and reputational standing to identify
any risks that could later jeopardize or weaken the
investment. Because due diligence is a standard
practice for the successful investor, it behooves the
food company being considered for investment to
conduct its own pre-transaction due diligence. Both
the investor and investee due diligence should be
conducted by a person with extensive food safety
experience and expertise, which may warrant the
employ of a qualified food safety consultant. With the
purpose of a due diligence being to ensure a safe and
financially solid buy, the food safety assessment of a
food company is an uncompromisable aspect of the
pre-investment process.
Keywords: Food Safety Regulation, Due Diligence, Food Safety
Certi昀椀cation, Internal Audit, Food Safety Modernization Act (FSMA),
Investment, Merger, Acquisition, Food & Drug Administration (FDA),
Risk Mitigation
Introduction
On January 4, 2011, President Obama signed the
Food Safety Modernization Act (FSMA) into law.
Although there had, of course, been food safety
laws prior to this, FSMA was heralded as the most
sweeping reform of U.S. food safety laws in more
than 70 years. Its primary modernization was the
transition from foodborne illness reaction to food
contamination prevention—now mandated by law and
enforced by the Food & Drug Administration (FDA),
which oversees the safety of about 80% of the U.S.
food supply.
Although FSMA has been in place for over a decade,
the food industry is still adapting to some of the
more complex aspects of the rules, even as the
FDA enforces them with inspections, citations,
warning letters, fines, and even closures. Even with
the modernization and enforcement, however, the
regulations provide only the minimum parameters for
food safety, with quality businesses going well above
the rules to keep their products safe. This not only
protects consumers but also fosters more efficient
and streamlined operations, high-quality products,
and satisfied customers. Consequently, companies
with strong food safety practices are likely to achieve
greater profits and future success.
On the other hand, the lack of a strong food safety
culture in a food establishment, even when the
company is technically following regulations, can
lead to serious food safety issues resulting in recalls,
consumer illnesses, and even deaths.
Thus, when investors are seeking involvement with
a food company, these key aspects of the business
should be assessed. From the perspective of the
seller (sell-side), the knowledge that a reputable
investor will conduct food safety due diligence
should be the impetus for a food business seeking
investment, acquisition, or merger to conduct its
own internal due diligence prior to seeking such
investment. This proactive measure enables it to
address any potential problems that may emerge
down the road.
What Is Food Safety Due Diligence?
Due diligence is the comprehensive appraisal of
a business undertaken by a prospective buyer or
investor to assess the business’ assets and liabilities
and evaluate its commercial potential. It is about
assessing the pros and cons of the company being
considered to determine if it is advisable to move
forward with the investment. Thus, food safety
due diligence focuses on the assessment of the
company’s processes, procedures, and operations
related to food safety to identify any “red flags”
(i.e., food safety risks) that could later jeopardize or
weaken the investment.
Food safety risks can be broken down into three
key areas of concern: regulatory, operational, and
reputational, all of which must be considered in a
due diligence investigation. Because each involves
different risks, with some overlap in the assessment
process, the food safety due diligence can be quite
complex, but it is critical in making a sound investment.
Whether the due diligence is being conducted by
the food establishment, the investor, or an external
consultant, the process will be similar. There are,
however distinct differences in each, as noted below.
