Financial data could help target risk-based inspections

A study has found an association between violations of food safety legislation and a company’s weak financial situation.

The work investigated the link between the financial situation of Finnish businesses and the inspection grades their food production establishments received. 

According to the study published in the journal Food Control, financial indicators could help recognize firms with money challenges, enabling inspections to be targeted at those businesses.

The hypothesis was that a weak financial situation would increase the risk of recurring non-compliance and decrease the ability to comply with legislation. A weak financial situation covers delays or difficulties in making payments or the business making a loss.

The study does not prove causality between a weak financial situation and the occurrence of non-compliance. However, such a situation likely influences the possibility of correcting problems.

Limited resources
Researchers used food control inspection reports on meat, fish, and dairy sites in Finland from 2016 to 2020 and the public financial statements of these companies. The data included 612 establishments.

In the Finnish system, the central agency, the Finnish Food Authority (Ruokavirasto), steers control actions with the contribution of regional authorities. Inspections of establishments are performed at the local level by municipal food control staff. Results range from an A for Excellent to a D for Poor.

Past findings have shown non-compliance requiring control measures in fish, meat, and dairy establishments. Plus, the correction of issues is sometimes partly insufficient.

Researchers said a risk-based approach was necessary as resources are limited, and only 73.2 to 82.7 percent of meat, fish, and dairy production establishments are inspected yearly in Finland.

Of the 612 establishments included in the study, 150 had overall C or D inspection grades for at least two of the five years under investigation. Of these sites with repeated non-compliances, 78 were from the meat sector, 62 from the fish sector, and 10 from the dairy sector.

Of the eight financial indicators examined, seven correlated significantly with the proportion of overall inspection grades C and D at least for one year.

Data indicated that almost a quarter of Finland’s meat, fish, and dairy plants repeatedly violate food safety regulations. Repeated non-compliances were more common in the meat and fish sector.

Role of finances in judging risk
An analysis found the low profitability of a food production establishment implies an elevated risk of recurring non-compliance. Also, the low liquidity of a food producer indicates a higher risk of non-compliance during the same year. The study found that persistently low profitability will impair the solvency and liquidity of a firm and reduce its ability to invest in food safety.

In a weak financial situation, neglecting legislative requirements to save money may be tempting. This might be probable if the company does not consider food safety to be important and is struggling to maintain adequate liquidity, said researchers.

Combining financial indicators for targeting food control inspections with approaches already applied, such as assessing the risk of an establishment based on production type and volume, would improve targeting and earlier intervention.

“These financial indicators could be used for mapping food business operators at a higher risk of repeatedly violating food safety, and inspections could be targeted at them. This could increase the effectiveness of food control,” said scientists.

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