Skip to main content


Retail, restaurant, food and beverage companies: 5 key risks to address in 2023 and beyond

These key risks are expected to challenge retailers, restaurants, and food and beverage companies through 2023, requiring a robust resiliency strategy.

Record rates of inflation, lingering supply shortages, recruitment and retention difficulties, and more: 2022 was fraught with risk challenges for retailers, restaurants, and food and beverage companies. These risks, and others, are expected to continue through 2023, requiring organizations to align behind a robust resiliency strategy.

1. Managing an overload of data

The abundance of data that retail, restaurant, and food and beverage companies possess — from customer preference information, to purchasing trends, to workplace injury figures — should help them navigate today’s risk landscape and better understand customers’ shifting preferences. Combined with information captured by their insurance advisors, this data can help them identify the source of existing risks as well as to quantify their potential impact.

However, most organizations have difficulty turning data into actionable insights, whether because the data sits in siloes; because it is unstructured; or because risk managers lack the tools, time, or knowhow to extract the needed insights.

When properly collected, managed, and analyzed, data can help organizations identify weaknesses that can leave them exposed to future shock events. For example, a food manufacturer may recognize that it is sourcing most critical ingredients from one vendor located in a hurricane-prone region and then quantify the potential impact of a risk event in that region. Identifying your risks and understanding the potential financial impact is a key to helping your organization prioritize its investments, both in mitigating and transferring risk.

Leveraging data to understand and quantify potential risks can also help identify opportunities for additional or alternative financing structures that can significantly reduce a company’s total cost of risk.  A major retailer, for example, wanted to better protect itself from an increasingly challenging insurance market. After reviewing premium, loss, and efficiency insights across multiple lines of coverage, the retailer implemented an integrated risk program that ultimately helped insulate the company from the changing insurance market. This action led to an estimated $20 million total cost of risk savings over a three-year period.

While partnering with a broker or insurance advisor can help organizations better understand, quantify, and control risk, and make better financing decisions, these partners can also  help companies benchmark insurance purchasing and claim performance information against that of their peers, allowing them to take even more informed decisions.

2. Increasingly challenging property market

Property insurance pricing in the US went up by 11%, on average, in the fourth quarter of 2022, marking the twenty-first consecutive quarter of increases. During the same period, industry inflationary indexes increased by 10%, requiring many organizations to adjust their reported values or risk being underinsured. Recent losses, such as fires destroying warehouses and distribution centers on top of natural catastrophes, have led carriers to carefully look at their attachment points, especially when facing valuation challenges.

As they face significant pricing increases, many retail, restaurant, and food and beverage companies are adjusting their insurance program structures, including by revising program and catastrophe limits and increasing their deductibles.  Others are exploring alternative finance options, including structured risk solutions and captives. Organizations should consider engineering inspections, acting on recommendations to increase properties’ physical resilience.

With carriers becoming more selective about the risks they’re willing to insure, it is important to start the renewal process early and focus on making a robust submission to underwriters. Up-to-date valuations are critical. As they continue to face an increase in submissions, many carriers are declining coverage for organizations that do not include detailed statement of values data, accurate values, and compelling engineering information. This underscores the importance of working with an experienced insurance advisor or broker who can help you confirm the accuracy of your data, supplement your available information, and then approach insurers that fit your risk profile.

3. Supply chains remain a fragile link

Supply chain issues were among the top 20 short-term risks outlined in this year’s Global Risks Report. Retailers, restaurants, and food and beverage companies should revisit their resilience plans and test them against multiple scenarios that may impact their suppliers. For example, a retailer may find it beneficial to consider scenarios that could delay seasonal shipments and make changes to minimize the risk.

Organizations should involve risk managers in supply chain decisions upfront, allowing them to evaluate potential risks and recommend risk mitigation or transfer plans. Identifying pathways through which risk managers can collaborate with other functions can make your processes more resilient.

Improving resilience requires strong business continuity planning. Keep in mind that major disruptions may also affect your competitors, which will be looking for alternate vendors. Consider identifying backup suppliers for your critical items and start building a relationship with them before you need their help. It is also important to have a communications plan ready in case significant supply issues affect your customers.

4. Evolving cyber risk requires constant scrutiny

Cyber threats continue to evolve in complexity, heightening network security and privacy risks that pose immediate and longer-term repercussions to operations and companies’ balance sheets. Shifting consumer preferences, supply chain optimization, and data-driven insights further compound the impact of cyber incidents while consumer and data protection frameworks, such as the California Consumer Protection Act and the Video Privacy Protection Act, can introduce unforeseen costs and defense exposures even in the absence of a breach event.

Cyber maturity has largely increased among retailers, restaurants, and food and beverage companies, with more investment in cybersecurity controls that have, in many cases, become a requirement to secure coverage. However, as risks intensify, it is critical for restaurant, retail, and food and beverage leaders to understand the impact of an outage or third party dependence and quantify in financial terms the variable costs and potential liabilities that could arise out of such an event. Such information can help prioritize where to invest in cyber resiliency efforts, including risk transfer solutions. Your analysis should include the potential cost of lost customer confidence, both in the short and long term, and quantify the efforts required to recover lost business. Considering contingent risk exposure to suppliers and vendors is an important component to developing strong cyber resiliency. A vendor breach could have a significant impact on your operations, making it critical to manage the risk at an enterprise level across legal, procurement, finance, and risk management functions.

As cyber risks evolve, organizations should take an enterprise-wide approach that goes beyond single-point solutions and invests in a proactive, integrated set of strategies to understand, quantify, and ultimately manage cyber risk across the enterprise.

5. Persisting human capital challenges

Retail and food services companies continue dealing with a tight labor market. And with the US unemployment rate the lowest in more than five decades, attracting and retaining employees remains a challenge, underscoring the importance for retailers, restaurants, and food and beverage companies to reexamine their total compensation strategy.

To reduce the risk of employee attrition, especially those with significant experience, and attract the right candidates for open positions, companies should also focus on other benefits. This includes offering flexibility in shifts, which can allow employees to improve their work-life balance. Employee assistance programs should be reviewed to ensure they are easily accessible, and that health benefits address mental health concerns.

Companies should revisit their value statements as a means to attract, motivate, and retain skilled and experienced employees and provide their people with opportunities to turn jobs into careers through learning and growth opportunities.  

As they navigate existing risks, retailers, restaurants, and food and beverage leaders should keep their eyes on the horizon and seek to identify emerging challenges that could contribute to increased volatility. At the same time, they should revisit the way they address and prepare their organizations to remain resilient in the face of both catastrophic and expected risks that could have a crippling impact on their operations and financial results.

Related insights