Common problems of product recall

Despite best efforts, unsafe products can circumvent quality management controls and enter the marketplace. The process of retrieving dangerous or non-compliant goods is labelled a recall.

Recalls present a real threat to organisations through: loss of sales, erosion of customer confidence, or damage to public health. However, a well-handled recall can reduce the negative impacts of an incident and could potentially improve the reputation of organisations through demonstration of honesty and integrity.

While recall plans must be specific to the relevant organization’s activities, all appropriate recall plans will sufficiently cover three key objectives. Organizations should seek to - at a minimum - prevent further sale of specific product, inform both the customers and appropriate authorities, and conduct a proper removal of product from the marketplace.

Leadership

Higher management should consistently be attempting to demonstrate commitment to supporting and developing the Product Recall Framework.

Activities to consider:

Writing a policy to ensure responsibilities and authorities for relevant roles are assigned, communicated, and understood.
Linking staff remuneration to product safety KPIs and encouraging the raising of product safety concerns by all staff.
Engaging and promoting a product safety culture, within your supply chain and customer base, through senior management discussions.

Planning

Taking action to address risks and opportunities beforehand is crucial to creating a robust response to potential product recall incidents, should they occur.

Activities to consider:

Performing a risk identification exercise along the products entire value chain, assessing the potential sources of risk and the effectiveness of controls; including third party controls.
Defining contingency plans according to risk and impact to the customer, as not all situations require a recall.
Developing a notification process to customers and other interested parties; with possible inclusion of third parties advisors and software.

Support

Finding the essential resources required for the establishment, maintenance, and continual improvement of the Product Recall Framework.

Activities to consider:

Identifying how the costs of a recall will be met through either: recall insurance, contractual transfer of liability, or balance sheet.
Categorizing the skills and competence necessary - internally and externally - during a recall event and if existing staff will have sufficient capacity during a crisis to complete extra duties.
Establishing and training a product recall team that has representation from all core teams including: quality, product development, logistics, finance, legal, and customer services.

Continual Improvement

Identifying improvement areas and implementing compulsory actions to meet Product Recall Framework necessities where required.

Activities to consider:

Practising a simulated recall, in order to verify that the recall plan is adequate for an authentic scenario.
Including the appropriate third parties in recall simulations to understand how teams will work collaboratively and negate any potential barriers.
Periodically reviewing root causes of near misses and actual recalls to identify trends or patterns to determine if corrective actions are needed.

There are four common issues that periodically impede organisations dealing with product recalls. Process and governance, information management, stakeholder management, and resourcing are topics that all parties would benefit from regularly discussing.

Process and Governance

Roles and responsibilities for addressing product quality - including the decision to action recalls - should be both structured and suitably adaptable to handle complex situations as they arise. Common weaknesses include: poor clarity of crisis response duties, inefficient cross-functional cooperation, missed opportunity, and delays to decision-making. This can make an organisation appear apathetic to both affected customers and the media.

Information Management

Traceability of affected products, along with the locating of relevant technical and procedural documentation, needs to occur quickly. Reliable recording of key decisions, tracking performance, and cost metrics are also essential for businesses to understand the financial cost of a recall event. Poor performance can result in failure to properly satisfy regulators and shareholders that all affected product is located and accounted for. Difficulty in managing costs or scope of remediation efforts can make loss recovery from insurers complicated.

Stakeholder Management

Transparent and consistent communication, internally and externally, is vital to ensuring effective mitigating control for reputational damage. The perception of dishonesty and inconsistency within organisations can undermine stakeholder confidence. This can potentially exacerbate a crisis beyond the original product issue.

Resourcing

Upon discovery of a fault, it is essential resources are mobilized rapidly to categorize the cause and scope of the issue. This facilitates a swift design and implementation of a technical solution. Identification and engagement of knowledgeable experts - with relevant experience - in short timeframes can also enhance effectiveness of responses. However, increasing customer-facing resources to meet the inevitable surge in demand can pose difficulties and therefore should be planned in advance.

Common problems of product recall

Core Recall Framework

Leadership

Planning

Support

Continual Improvement

Process and Governance

Information Management

Stakeholder Management

Resourcing

Marsh Advisory offer staff training, mock recall exercises, maturity assessments, and recall documentation to ensure organisations are ‘recall ready’.

Hugh Waggett

Felix Titherley

Other areas of interest

Marsh Risk Advisory

Risk Consulting

Risk Analytics

Claims Management

Related insights

Managing emerging NFRs and embedding operational resilience strategy

Enhancing financial preparedness: The importance of fund reviews for local councils

Liability Claims Bulletin - Seventh Edition | November 2024

ESG: Captive Solutions Guide

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Common problems of product recall

Core Recall Framework

Leadership

Planning

Support

Continual Improvement

Process and Governance

Information Management

Stakeholder Management

Resourcing

Marsh Advisory offer staff training, mock recall exercises, maturity assessments, and recall documentation to ensure organisations are ‘recall ready’.

Hugh Waggett

Felix Titherley

Other areas of interest

Marsh Risk Advisory

Risk Consulting

Risk Analytics

Claims Management

Related insights

Managing emerging NFRs and embedding operational resilience strategy

Enhancing financial preparedness: The importance of fund reviews for local councils

Liability Claims Bulletin - Seventh Edition | November 2024

ESG: Captive Solutions Guide