Product recall: Not a question of if… but when

May 3, 2023

A product aisle in a store.
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When their products’ safety comes into question, time is everything for the thousands of companies that endure product recalls each year. With public safety and financial and reputational damage at stake, decisions need to be made quickly. A fast but ill-judged choice, however, can add cost and, depending on the circumstance, irreparable damage to an organization’s brand and reputation.

In case you missed the educational session at the 2023 RIMS Conference & Exhibition, here’s a recap of the top conversation starters:

Regulatory enforcement

2023 will likely be characterized by the same strict regulatory enforcement that all industries saw in 2022. Many of the new regulations and legislation we discuss in the State of the Nation report will begin to impact manufacturers and retailers throughout the year — requiring increased vigilance to product safety. The Consumer Product Safety Commission (CPSC) — alongside several other regulatory administrations — is heating up; as new rules are introduced, companies will be expected to increase their efforts. In fact, not doing so can put your business at risk of civil/criminal penalties.

Supply chains continue to become more diverse, and regulatory environments more complex. As a result, companies face increased liability and exposure. As regulators bear down on manufacturers, engaging third party experts and maintaining active recall and crisis plans will become increasingly important to protecting your brand’s reputation and bottom line.

Recall preparation

The biggest costs of a product recall event aren’t the event itself, but the challenges that arise as a result: business interruption, loss of sales and reputational damage. Is your organization sufficiently prepared to handle these disruptions? Defective products not only pose a serious safety risk to the public but can also cause significant financial and reputational damage. Information (and misinformation) spreads rapidly, so getting ahead of potential media coverage is critical to keeping customers.

Whether you’re laying the foundation for your plan or refining one you already have in place, follow these four steps to mitigate the damage:

  1. Create sound crisis and communication plans.
  2. Conduct mock recalls on a regular basis.
  3. Actively train employees and test the readiness of both your internal teams and partners.
  4. Secure recall insurance that provides funds to handle a potential incident.

Common missteps

You might assume that the likelihood of your brand experiencing a recall is slim, but all it takes is one incident. If the recall — no matter how small — is mismanaged, your brand is at risk. If company X isn’t in control of the communications and there were related injuries or deaths, misinformation can spread rapidly. If company Y delayed moving on a recall, they could be charged significant fines. If company Z misjudges the extent of the recall, they could be quickly inundated with high volumes of complaint calls.

As the risk landscape continues to evolve, there is a growing number of external variables that can trigger a product defect or event, many of which are outside of the manufacturers ‘direct’ control — from supply chain concerns and human errors to environmental factors and regulatory changes. Think of recalls as a part of day-to-day business and recognize that no matter how prepared you are, they can still happen. Having a plan in place, training, testing the plan, identifying gaps in the infrastructure and making adjustments is critical to success.

Nothing says more about a company’s commitment to its customers than its efforts to uphold promises of safety, quality and service. That’s why companies are often remembered more for how they handle an in-market challenge (such as a recall) than for the problem itself.

While it’s true to say that these events can have ruinous consequences, they also offer a valuable opportunity for brands to connect with customers, to build greater loyalty and advocacy.

Long-lasting partnerships

Whether you need scalability in your in-house capabilities or a complete, product recall solution from planning through disposal and closeout, Sedgwick has the unmatched experience and resources that helps retain suppliers, reassure customers and protect the brand. With a 25-year history managing some of the most sensitive product recall challenges in the world, our experts can help you plan for and manage a product recall event — no matter the size, industry or location. To learn more, download the State of the Nation report.

The content of this blog was originally discussed on Tuesday, May 3 at the 2023 RIMS Conference & Exhibition, alongside Southeastern Pennsylvania Transit Authority’s chief risk officer, Rick Graham.

Tags: brand management, Brand protection, brand protection and recall, brand recall, consumer recall, Preserving brands, Product recall, recall