Regulatory, legal and reputational risks increasing for all businesses in 2022

December 13, 2021

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By Chris Harvey, VP, crisis solution

We are living through a perfect storm of heightened business risks that are impacting every industry — from labor shortages, supply chain issues and inflation to increased regulatory oversight and enforcement.

When combined, these risks pose substantial regulatory and litigation threats to nearly every business, as reported in the latest edition of our 2021 recall index report.

Our report presents the latest recall data, trends and predictions for what to expect as we head into 2022. We also feature insight from some of our strategic partners at leading law firms to help you prepare for the increased risks created by product innovations and evolution in the regulation of food, drugs, consumer products, medical devices and automobiles.

Automotive industry to see stricter regulatory oversight and increased enforcement

After increased activity in the third quarter, recalls are back in line with last year. Third quarter 2021 recall activity increased to a seven-quarter high at 207 events — representing a 21.1% increase in the second quarter of 2021. And beyond these numbers, the automotive industry continues to face significant challenges in a turbulent global market — ranging from maintaining a trained workforce and supply chain disruptions, to shifting consumer demand. To top it off, regulators across the board are promising to crack down further.

As today’s National Highway Traffic Safety Administration (NHTSA) takes shape, the overall theme is “more.” With the stage set for stricter regulatory oversight and increased enforcement, automakers should be prepared for both strict regulation and a more aggressive and consumer-oriented NHTSA under the Biden administration.

An era of tougher enforcement in store for the consumer product industry

The CPSC announced 60 recalls in the third quarter of 2021, maintaining a volume consistent with quarterly averages observed in 2019 and 2020. Despite the slight slip in reported events, third quarter recalls affected about 21.3 million units, representing a 36.6% increase compared to the second quarter.

In our last quarterly Index, we mentioned changes within the CPSC were already coming to fruition. And now, for the first time in four years, the CPSC has an official chairman. Companies should take this as a sign that an era of tougher enforcement is here, as his stated priorities seem to indicate that the agency’s recent more aggressive approach to oversight and enforcement will likely remain. Companies can expect to see a continued increase in the quantity of announced recalls and in civil penalties.

The FDA’s New Era of Smarter Food Safety Blueprint remains a driving force

Food recalls dropped 11.3% to 94 events in the third quarter, with undeclared allergens remaining the top cause of recall events for the 24th time in the last 27 quarters. For the industry, the FDA’s New Era of Smarter Food Safety Blueprint remains a driving force. But as manufacturers face continued workforce challenges, the fourth pillar of the blueprint – food safety culture – will become even more critical. Health and safety risks related to COVID-19, combined with labor shortages, mean companies must focus harder on training, communication, and accountability. As for the regulatory environment, it will remain turbulent for the foreseeable future. Even if the promised federal regulation is approved, it is likely to create as many questions as answers.

Medical device industry to see a new “normal” in 2022 and beyond

As we come closer to full emergence from the COVID-19 pandemic, regulators, companies, and consumers are eager to get back to “normal.” But the reality is that the pre-pandemic regulatory, healthcare, and business environments are long gone. For medical device manufacturers and healthcare organizations to be successful, there are several key realities to contend with now and in the future. Issues like counterfeit and fraudulent products, AI, ML and software in medical devices, component shortages, supply chain disruptions, and others are still very much a concern for the industry. Additionally, after falling for four straight quarters, medical device recalls jumped from 173 events to 235 events quarter-over-quarter, representing a 35.8% increase.

New rules and legislation on the horizon for the pharmaceutical industry

COVID-19 is having a far-reaching impact on the healthcare industry – from operational and supply chain impacts to regulatory oversight and enforcement implications. For one, the FDA learns more every day about why medication errors happen, and if the agency believes that medication errors are overlooked, new rules or legislation will be forthcoming. Additionally, with the FDA and Federal Trade Commission now collaborating, it is critical manufacturers and marketers of consumer-facing products be fully aware and compliant with all of their legal and regulatory obligations. As for numbers, recall events jumped 45.8% in the third quarter after a three-quarter slide. These recalls impacted 38.1 million units, representing a 65.8% decrease quarter-over-quarter. Nevertheless, third quarter recall numbers are in line with the quarterly average number of events and units impacted in 2019 and 2020.

It’s a certainty that regulatory, legal and reputational risks are increasing for companies across all sectors in 2022. From a product-safety standpoint, the risks are numerous. To protect themselves, companies must carefully re-evaluate all manufacturing processes, vet supply chain partners, and invest more time and resources now to prepare their recall management, crisis, and communications plans. As you do that, remember to seek out expert partners for their experience and abilities. Doing so can save you millions of dollars in regulatory and litigation costs in the months ahead.

Get more recall data, trends and predictions, along with additional insights and commentary from some of our strategic partners in the latest edition of our recall index report – available for download here.

Tags: automotive, Brand protection, consumer products, FDA, Legislation, Medical devices, pharmaceuticals, recall, Recall Index, Regulatory change + Compliance, Resilience + Readiness