Don’t Underestimate the Impact a Recall Can Have

March 10, 2022 | Taking Care of Business Conference in 'Key City' in 2022 Jack Carra, AssuredPartners,

Despite the number of product recalls reported each year, companies often underestimate the financial and reputational impact a recall can have. In 2021, the FDA reported 5,310 recalled products, and the Consumer Product Safety Commission (CPSC) reported 219 product recalls. These figures represent a decrease from 2020; however, supply chain challenges, worker shortages, and increased regulatory oversight pose substantial threats.

Recall frequency fluctuates from one year to the next and by industry sector. One month into 2022, the FDA reports 1885 recalled products, and the CPSC reports 19 recalls. If the current pace of recalls is an indicator, companies should vet supply chain partners, re-evaluate their manufacturing processes, and invest in resources to minimize the frequency and expedite the recovery process.

When a product’s safety is questioned, timing is everything. Embracing crisis management through pre-event preparation and testing is an essential first step. Only through recall simulations and product testing can a company discover a potential issue. Continuously monitoring a range of indicators can help a company establish whether something has gone wrong as early as possible. If an issue is discovered, the company can act immediately by putting the recall into action and investigating the issue.

Early and informed notification is essential if a product needs to be recalled. Ongoing, multi-channel communication ensures customers are reached and helps the process go more smoothly. A wellmanaged recall will proactively help restore customer confidence and return the business to normal as quickly as possible.

The first moments after a company becomes aware of a potential product safety issue are critical, which is why companies must have a well-thoughtout plan in place before something occurs. Good risk management, along with an appropriate insurance program, offer a holistic approach that can help a company recover faster.