After the devastating economic crisis, and the COVID-19 pandemic, Lebanese Agri-Food businesses are nowadays facing a new disruption: the Risk of War. For this, and through this reading, Lebanese Agri-Food producers can navigate the potential risks that might occur throughout the upcoming period and perceive some of the suggestions to mitigate these risks. This reading is nothing but an eye-opener for Small and Medium Producers, emphasizing them to develop their proper Risk Management Plans depending on their specific circumstances. In fact, among others, wars might disrupt supply chains and labor availability, fluctuate markets and trade agreements, exacerbate the environment and resources, and alter production processes. For this, developing a comprehensive Risk Management plan ensures business continuity, safeguarding the livelihoods of employees and the Agri-Food supply to the nation, making risk management vital for Agri-Food businesses in war zones. It allows companies to anticipate, evaluate, and develop mitigation strategies against potential risks. For this, Lebanese Agri-Food businesses are urged to identify potential risks, evaluate their likelihood, assess potential impacts, and establish contingency measures.
Main Business Elements to Address in Times of War
Below are the main business elements that should be addressed by business owners and corresponding stakeholders, namely board members and upper management teams, enabling the least disruption possible. Each risk occurring to these elements must be assessed for its likelihood and severity, using tools like risk matrices to prioritize mitigation efforts.
Infrastructure:
Infrastructure damage from conflicts can disrupt production, storage, and transportation. The likelihood of occurrence depends on the geographic proximity of the facilities to the conflict lines, and the severity on the Business depends on the size, establishment, and robustness of the Business per se. To mitigate this risk, it is indispensable to:
- Issue corresponding insurance for facilities, automobiles, and other infrastructure at risk.
- Relocate spaces at risk into other sites owned or to be rented by the company with lower risks.
- Reinforce facilities at risk by structural and security reinforcements, fireproofing and fire safety systems, backup power and water supply, critical equipment, and assets protection, establishment of safe rooms, and off-site/cloud data backup systems.
Financials:
Cash flow problems might occur due to halted sales and increased costs. The likelihood and severity of this risk depend on the escalation and geographic context of the war. To mitigate, a strategic financial scheme should be developed considering the below actions:
- Set up Emergency funds, secure lines of credit, and explore in-kind trading within the community.
- Maintain liquidity and reduce dependency on one market.
- Tighten cost control and expenditure.
- Cash Flow Forecasting and Contingency Planning.
Procurement and Stock Management:
Interrupted supply chains could lead to shortages in raw materials and essential inputs. The likelihood and severity of occurrence depend on preserving vital infrastructure like airports and ports from attacks. To mitigate:
- Connect with your suppliers, validating import routes, alternatives, and contracts including Contingency clauses.
- Explore local suppliers and partners whenever possible.
- Implement the Just-in-Case inventory strategies to hold representative buffer stock of raw materials and consumables, while maintaining the utmost standards of storage management.
- Relocate storage areas and/or divide the stock into different storage areas if deemed needed.
Human Resources (HR) Management:
Managing Human Resources in times of war is revered. Staff safety risks, disrupted access to workplaces, possible displacement, and recruitment challenges can be faced. The likelihood and severity of this risk depends on the intensity and duration of the conflicts. To mitigate:
- Offer flexible work arrangements by adjusting working hours and/or work-from-home hours.
- Cross-train employees to ensure operational flexibility.
- Create a Crisis Communication Plan with instructions and continuous updates on safety, work instructions, and business operations.
- Strengthen Employee Training on Crisis Response such as Emergency Response and first-aid training.
- Secure safety nets for workers, including insurance and relocation plans if necessary.
- Implement Mental Health and Wellness Support whenever possible.
- Develop a Contingency Staffing plan to mitigate temporary staff shortages.
Production Management:
Production processes can be significantly disrupted by war, with potential damage to infrastructure, limited access to raw materials, labor shortages, and limited access to markets. The likelihood and severity of this risk depend on the proximity to conflict zones, transportation blockages, and interruptions in essential utilities. To mitigate, an emergency production strategy should be developed taking into consideration the following actions:
- Adjust production schedules avoiding peak conflict periods and risky transportation routes.
- Implement Backup Power Systems, renewable ones whenever possible.
- Increase production flexibility by automating and/or remotely monitoring key processes to reduce the complete dependency on manual labor.
- Diversify production sites; establish small production facilities in safer regions/countries; explore joint ventures to share production resources.
Access to Market:
Conflicts can disrupt access to local and international markets due to damaged infrastructure, blockades, economic instability, demand fluctuations, and changes in consumer behavior. Below are some actions enabling to mitigate:
- Diversify Market channels including e-commerce platforms and direct-to-consumer sales.
- Strengthen local distribution networks and form alliances with local businesses.
- Build strong export relationships with current and potential foreign distributors and partners.
- Utilize digital marketing and sales tools and maintain clear and transparent customer communication.
- Adapt to emerging local market opportunities, by adjusting pricing, packaging, or product offerings.
- Partner with Humanitarian Organizations requiring specific food aid products fit to the available production lines.
Collective Efforts to be Considered
The development of a war risk management plan and its implementation is an exhaustive process. While some of the implementation processes should be tackled and planned privately at the corporate level, others can be tackled collectively with peers and experts. In this context, a business cluster like the QOOT Cluster plays a pivotal role in helping Agri-Food producers navigate uncertainty and mitigate risks. Clusters provide a collaborative network that fosters knowledge exchange, strategic partnerships, and shared resources, enabling businesses to adapt swiftly. By offering a platform for best practices, access to alternative markets, and opportunities for joint ventures or local sourcing, clusters are pivotal for SMEs facing war-induced disruptions. Through proactiveness and collective strength, Lebanese Agri-Food businesses can better withstand the pressures of conflict while ensuring the sustainability of their operations and contribution to the national food supply.
