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Product recalls affect every business and they’re on the rise

Product Recall

It’s often said that you learn more from your mistakes than your successes, and for your business, a product recall incident is the moment of truth when customers get to see your true colours. Respond well and you can increase customer loyalty; but get it wrong and they might never trust you again.

Even if you have an excellent health and safety record, don’t fall into the trap of thinking you’re immune from a product recall. Tightening regulation has upped the number of product recalls; while more complex supply chains mean an increased number of ingredients and components are sourced from third parties, making it more difficult to control quality.

Earlier this month London law firm RPC published research that said the number of UK product recalls in 2014/15 had jumped by 26% compared to the previous year, hitting an all time high of 310. That’s almost one a day.

Some firms believe that their product liability policy will cover them in the event of a product recall, but it won’t. You need specific product recall insurance if you want those claims paid.

Product liability policies pay out for third party losses and property damage caused by a defective product, but they don’t cover any of the following:

  • Recall costs
  • Inspection costs
  • Destruction costs
  • Product repair or replacement costs
  • Slotting and re-slotting fees
  • Business interruption
  • Rehabilitation of brand
  • Consultancy advice

These costs can quickly escalate and if you don’t have product recall insurance, then recovering from such a blow can be impossible. But managing a product recall successfully also demands having the right level of planning in place, and many businesses don’t.

How well, for example, could you cope with the following challenges that a product recall event throws up?

Investigating a potential product recall

Do you have the in-house expertise to investigate the cause of a defective or contaminated product and to carry out the requisite testing to identify its source, severity and potential impact?

Reporting details compliantly

How quickly could you gather the information needed to satisfy the appropriate regulatory bodies that all of the affected products were covered by your recall? Do you have that information stored in a format that’s easily searchable and recoverable?

Communicating with the media

Social media demands instant responses and these have to be informed, assured and consistent. In the face of intense questioning could you provide a message that provides a sufficient level of detail and gives your business a clear, single voice?

Communicating with customers and suppliers

Customers understand that mistakes can be made, but they need you to be upfront about your failings and give them confidence that you’re addressing them. They need to be reassured and quickly. Are you able to respond rapidly enough to give them that assurance?

Your suppliers will want to protect their own businesses and need to know how they’ll be affected. How fast could you provide detailed data on the product recall and the way it’ll affect the ongoing trading relationship?

Sourcing additional manpower

In recalling a product you’ll need additional manpower to make it happen quickly and to prevent it affecting your other business lines and activities. Do you have the storage needed to house the recalled product and how swiftly could you ramp up production to restock customers after the product recall has been completed?

These are just some of the issues you’ll have to deal with in a product recall situation and so it’s vital that you’ve put plans in place and apportioned specific responsibilities for managing them.

MRIB can help you through the issues at stake, make sure your plans cover off every base and that your insurance programme is watertight. If you’d like expert advice then please get in touch.