Case Studies > Risk Management in IoT: A Case Study of Chipotle

Risk Management in IoT: A Case Study of Chipotle

Technology Category
  • Functional Applications - Enterprise Resource Planning Systems (ERP)
Applicable Industries
  • Food & Beverage
  • Healthcare & Hospitals
Applicable Functions
  • Product Research & Development
  • Sales & Marketing
Use Cases
  • Inventory Management
  • Regulatory Compliance Monitoring
About The Customer
Chipotle is a major player in the food industry, known for its innovative approach to fast food. The company has built its reputation on offering fresh, healthy, locally sourced food. However, a series of salmonella outbreaks linked to food sold in its branches led to a significant reduction in sales and share prices, as well as a damaging civil lawsuit. The company's failure to implement necessary risk management measures to support its innovative approach was identified as a key factor in these issues.
The Challenge
Chipotle, a renowned food industry innovator, faced a significant challenge when it experienced a series of salmonella outbreaks linked to food sold in its branches. The company's reputation for safe, sustainably grown food was severely damaged, leading to a 35% reduction in share prices since the end of October and a 30% drop in December sales in some locations. The situation was further complicated by a civil lawsuit alleging that Chipotle failed to disclose that its quality controls were inadequate to safeguard consumer and employee health. The company's failure to implement necessary risk management measures to support its innovative approach to fast food was identified as a key factor in these issues.
The Solution
The case study suggests that had Chipotle implemented an enterprise risk management (ERM) solution, the outcomes could have been significantly different. ERM extends to a robust vendor risk management methodology that helps identify risks associated with a company's supply chain, which could have prevented the food contamination. Even if the outbreaks had still occurred, Chipotle could have used ERM reporting capabilities to evidence its risk program. This would have avoided regulatory penalties, provided evidence of control activities, and guided risk disclosure, thereby eliminating liability for non-disclosure of risk. The case study cites the example of Morgan Stanley, which avoided prosecution in 2009 thanks to the robustness of its internal policies and procedures.
Operational Impact
  • The case study suggests that the implementation of an enterprise risk management (ERM) solution could have significantly altered the outcomes for Chipotle. With a robust ERM system in place, the company could have identified and mitigated the risks associated with its supply chain, potentially preventing the salmonella outbreaks. Even if the outbreaks had still occurred, ERM reporting capabilities could have provided evidence of Chipotle's risk program, avoiding regulatory penalties and guiding risk disclosure. This would have helped maintain the company's reputation for safe, sustainably grown food and could have prevented the significant financial losses experienced.
Quantitative Benefit
  • 35% reduction in share prices could have been avoided
  • 30% drop in December sales in some locations could have been prevented
  • Potential avoidance of regulatory penalties and associated financial costs

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