Skip to main content
Marsh logo

Article

Common problems of product recall

Recalls present a real threat to organisations through: loss of sales, erosion of customer confidence, or damage to public health.

03/28/2023 · 4 minute read

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

Core Recall Framework

selected option
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.

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

For more information please contact Marsh Advisory.

Placeholder Image

Hugh Waggett

Advisory Quality and Recall Leader, Marsh Advisory

Felix Titherley

Felix Titherley

Advisory Quality and Recall Consultant, Marsh Advisory

Other areas of interest

Male hand is pointing on a high technology futuristic digital screen with financial analytics

Marsh Risk Advisory

09/13/2022
Placeholder Image

Risk Consulting

07/14/2021
Placeholder Image

Risk Analytics

07/23/2021
Placeholder Image

Claims Management

07/23/2021

Related insights

Vehicles Driving on a Spaghetti Junction Interchange near Birmingham the UK at Sunset

Case Study

Transforming a transportation and logistics company’s insurance program

11/22/2024
Placeholder Image

Article

Risk perception and management: Insights for a changing landscape

11/20/2024
Digital Data Technology. KPI Business Dashboard Technology. Close up of hands on laptop, screen showing analytics.

Podcast

Risk in context podcast: Adapting insurance programs to evolving risks through analytics-driven decisions

11/19/2024
Earth Day concept with tropical forest background, natural sence with canopy tree in the wild

Article

Facilitating the bankability of energy transition projects: Risk management and insurance considerations

11/15/2024
View more