How Patrick Smith is managing Deliveroo’s intangible risks

Strategic Risk Europe

Much more than a food delivery service, Deliveroo serves up vast amounts of big data – and fresh new risks – daily. It relies on its global insurance lead consultant Patrick Smith to stay creative.

Everything about Deliveroo screams entrepreneurship and innovation. From its trendy office, which is exactly what you might expect from a new-age tech company (big, bright, lounge-style and open-plan, complete with a one-acre rooftop garden) to the people (high-energy, super-smart, creative types who eschew the corporate dress code). This feels like an environment where great things happen.

Technology, plus creativity and innovation are the catalysts for Deliveroo’s meteoric rise from start-up to a business that has transformed the food industry, and in just five short years. But it is the risk management story that is truly inspiring here, and it is fuelled by the same level of gusto and creativity that Deliveroo has become known for. The man helping to drive it? Patrick Smith, Deliveroo’s global business resilience and insurance consultant.

In 2013, the company was launched with one simple mission: to deliver upmarket restaurant meals to the masses, but Smith sees the company’s identity as anything but simple.

“Is Deliveroo a food delivery service? Yes, it’s passionate about food” he says. “Is it a digital platform? Absolutely, it’s that too. Does that make it a technology company? I guess you could say that.”

So what is Deliveroo really? “A big data company,” Smith states. “Deliveroo uses its digital platform to seamlessly connect hungry customers with restaurants and those who offer their service to deliver this food. The app creates and uses a lot of data that provides the intelligence about who wants to eat what and where – that’s powerful. How this data is used is what makes Deliveroo more than just a food delivery service.”

Real food, virtual risk

The company’s impressive growth reflects just how big its big data potential is. Deliveroo’s on-demand mobile app is the jewel in its big data crown and is what earned it a reputation as one of the pioneers of the burgeoning gig and on-demand economies.

The app connects hundreds of thousands of people to about 50,000 restaurants in 200 cities and 13 countries. About 50,000 freelance riders around the world make deliveries within, it claims, just 30 minutes of an order, 24 hours a day, seven days a week.

With such a large digitally connected network, the food delivery company is gathering data on just about anything and everything concerning its restaurants, riders and customers. From food preferences to operational matters: it knows what food is trending (potatoes in all varieties: mashed, fried, sweet, according to one report); and which cities like their curries very spicy or very mild (in the UK, Cardiff takes the title for ‘spiciest city’, while Coventry keeps it mild).

On the operational side, it can match delivery demand to consumer activity and orders based on its algorithmic calculations of food preparation times; and as soon as a health and safety incident has taken place, it can react and resolve it quickly, and anticipate and proactively reduce the risk of future issues.

Although core to its business, its fame comes from more than just a snazzy app, says Smith: “Will Shu, our chief executive, was recently named one of the top food influencers by UK newspaper, the Telegraph. This isn’t just because he developed a fast-blown digital platform, it’s because Deliveroo is using its platform to influence.

“We have a business that is directly influenced by customer behaviour, which then uses this information to influence the food industry, with the aim of making what was previously unavailable, affordably available. This is terrifically exciting.”

Its newest data-inspired venture? A series of delivery-only kitchens strategically placed near to areas showing unfulfilled demand for good-quality restaurant food – all guided by intelligent big data analysis and customer insight, of course.

These ‘virtual kitchens’ are a new phenomenon in the rise of the intangible and gig economies. From London to Singapore, Paris to Hong Kong, Deliveroo’s satellite kitchens are being set up across the world in purpose built or developed units. Fully equipped and close to its customer base in residential and office areas, these kitchens give restaurant brands access to untapped markets, customer demand, as well as a network of freelance riders – without the overheads of a physical restaurant.

They represent a new reality of ‘virtual branding’, in which a restaurant’s food takes centre stage and where a restaurant’s reputation is measured mainly on this and none of the other indicators of brand quality for bricks and mortar restaurants (such as front-of-house customer service, food presentation and ambience).

This is the potential of the intangible economy, where businesses can achieve huge success by owning little more than a mobile app, digital platform or online booking system (think Uber, Airbnb and arguably, co-working office space provider, WeWork). Even the world’s most successful businesses, Apple and Amazon, while selling physical products, achieved market dominance on more nebulous concepts: algorithms, models and brands.

And traditional corporates are not shying away. They too are becoming ‘asset light’ – in fact, more than 80% of S&P500 businesses are made up of intangible assets – data, intellectual property and brand.

It is against this economic backdrop that Smith is managing a whole host of ‘newer’ risks and an elevated level of uncertainty. And it is these more strategic risks of reputation, people, cyber and IP – the risks connected to the company’s brand, mission, ethos and future – that trigger and excites Smith’s seasoned risk radar.

The great protector

It is for this reason, to defend the reputation and brand Deliveroo seeks to stand by, that Smith is keen to dispel the notion that tech start-ups in the new economy are ‘disrupting’ their respective industries.

“Deliveroo is transforming, enhancing and somewhat pioneering the reach and capability of the food industry. I’m not sure it is disrupting it,” he asserts.

“The Deliveroo model helps restaurants cook more food that people want to eat. It is opening consumer channels that didn’t previously exist – it is not questioning the way in which restaurants operate but allowing them to develop. It is building another layer of opportunity for restaurants and customers, using technology and data intelligently to make it happen.”

So important is this mission that it filters right down to every single level of the company. “Deliveroo’s model is a business playbook for its people and operations in all territories. There isn’t a 15th floor, with a special lift for executive management – everyone is together. The company operates on the concept of ‘shadow of the leader’ and everyone understands their role in delivering Deliveroo’s strategic objectives. However, the devil – or the risks to our brand – is in the detail.”

Anything that could harm or enhance Deliveroo’s hard-earned reputation takes priority. “Deliveroo is very smart in understanding the importance its brand image has on its existing and future value,” Smith says. “Deliveroo cares about how it is perceived by customers and stakeholders, and ensures that it takes good care of them. This is what I love about Deliveroo. It has a laser focus on doing business properly so that its people, kitchens, freelance delivery riders and consumers are fully protected.”

Of course, Deliveroo has been no stranger to public criticism. Recently, the level of protection that gig-economy businesses offer to freelance workers has come under scrutiny. Self-employed workers are generally not entitled to protections such as minimum wage, holiday and sickness pay. Politicians, unions and trade associations have been fervently campaigning for these conditions. Deliveroo’s response? To build a global insurance programme that can offer better protection.

“The big difference between traditional organisations and the Deliveroo model is that the people who deliver food are not employed by Deliveroo – they are freelance. And they value the flexibility and freedom that freelancing affords,” says Smith. “Deliveroo’s ambition is to be market leaders in the gig economy for protecting freelance riders who offer their services to the platform.”

“So, I have been focused on building a suite of solutions that can offer new and leading protection and security to riders when on the job, while respecting and not prejudicing their benefits of freelancing.”

The culmination of this work is a free-of-charge insurance programme, with annual premiums of about £10 million. It provides coverage for medical costs, income loss owing to accidents, fixed benefits for serious injuries and third-party liability coverage to riders on the road. The company says it is “more substantial and wide-ranging than comparable products for those working in the on-demand economy”.

People-related risks involving in-house members of staff take a different guise, however, being more closely linked to intellectual property. Deliveroo operates a culture of collaboration and sharing, backed by a clear vision.

“When you are a creative organisation and constantly expected and supported to think innovatively, bounce and try new ideas, then it is vital that you know which are commercially sensitive and should be protected and kept confidential.

“So, when it comes to people, the concerns are not restricted to traditional people risks but the level of IP and know-how that our people hold and the risk of it being inadvertently leaked or lost.”

This is where corporate risk culture becomes a strong risk management tool, explains Smith. “Managing IP-related risks comes down to having a set of strongly defined business values and behaviours. In any environment of fluid exchanging of ideas, it is a strong culture of trust and high motivation with clarity of vision that protects our IP. Deliveroo, unreservedly, trusts its people to understand what the game is and to be part of a family that makes things work. That’s just the way Deliveroo is.”

Act like there is no insurance?

Crucially, insurance can’t be your only armour to defend against these intangible risks.

“If you start managing any issue from the point of asking insurance-related questions, protecting intangible risks becomes very hard, because suddenly you frame the question around what insurance can or cannot protect; whether it wants or doesn’t want to provide coverage. For me, I take a ‘risk first’ approach in the context of the particular strategic aim. What is it that we are trying to achieve? That done, I see insurance as only one risk management opportunity,” Smith says.

“The challenge is not necessarily in understanding what the risk to intangible assets might be, but the size and velocity of that risk. To what degree will it threaten the company’s strategy? What does a risk scenario look like and how would we deal with it if an event occurred?”

Instead, the story should begin with the notion that all risks are uninsurable. “Act like there is no insurance and plan for the risk scenario. If your data is stolen, for example, what are the recovery steps that would protect your business strategy and objectives? What resources should be deployed and prioritised? What are the crisis management, business resilience, business continuity, and disaster recovery plans? These plans then need to be tested and simulated. To me, that’s real practical risk management that the business can engage in.”

What’s the takeaway?

These ‘new’ risks are what excite Smith and why he was keen to accept the challenge when Deliveroo first approached him in July 2017. “I knew that accepting the assignment with Deliveroo would expose me to a different world from the one that most corporates are challenged by, and that it would evolve and be a journey in itself.”

“I’ve spent many years in traditional environments, where I was responsible for insurable risks. But now having experience in both traditional and creative businesses, allows me to help fix a huge issue. The issue is this: creative organisations have new and different risks but are relatively new to risk financing, risk transfer and insurance, and so arguably, they can struggle to articulate their needs.”

“Conversely, you have providers of risk financing, risk transfer and insurance, who have age-old policy wordings and historic and embedded ways of operating. How can they align with new and changing risks of today, and respond to new fast-growing organisations with fresh business models?”

It just takes imagination, he believes. “You need strong risk managers to fight the corner of the creative organisations in a way that stimulates creativity in service providers, helping them to unleash their strengths and capabilities in a different way.”

“Most insurance is offered as an annual contract. Deliveroo is not an annual business, so immediately, I’m thinking, how do I remake traditional risk or insurance to address this different type of problem? My approach to risk has been enhanced by working in places like Deliveroo and other companies and industries. I import different ways of thinking and evaluating risks,” he says. “I can cite several examples of times I have gotten neat things done because I have started in a completely different place.”

Smith isn’t afraid to challenge the status quo. His philosophy for managing complex risks of new economies is to learn from the old – his traditional roots – and embrace the new.

For all the digital innovation and let’s call it ‘disruptive transformation’ that Deliveroo has delivered, it has also challenged traditional risk and insurance management – for the better. And you thought Deliveroo was set up to simply to deliver food?