Articles

Total Recall

 

Product recall is a real risk for any manufacturer or importer. Every year there are around 500 product recalls in Australia across a wide range of categories – candles, cars, clothing, cots, computers, not to mention food, drinks and medicines.

Initiating a recall is not a decision to be taken lightly. It can be an expensive matter, with lost sales and profits, plus the expenses of effecting the recall and then rehabilitating the product afterwards in the market. Management will wish to be satisfied that there is a compelling reason. This is easy where there is a defective product that poses a clear threat to safety, but often the picture is not so clear cut.  What if there is only a small spike in customer complaints? What if the threat to safety is unclear? What if a causal link with the product has yet to be established? 

Knowing how to respond is a matter of having sound procedures and exercising good judgment. In addition to having a crisis management plan, companies should also have a product recall plan with clear responsibilities. Some companies state that only the CEO can authorise a recall but what if he or she is overseas and cannot be contacted at the crucial hour? It is much better to have a dedicated team who can gather the facts, assess the threat, weigh up the options and make a considered recommendation to an executive group that is empowered to make the necessary decision.

While having a recall plan is a sensible first step, it is only a piece of paper. What matters is everyone knowing what they are expected to do. The best way to test people’s understanding of the plan is to conduct a simulation exercise. This involves considering potential scenarios based on events that have happened before or that could arise in the future.  Some basic facts are put to the team who then have to assess the threat.  New issues may emerge that force a reappraisal of the situation. 

While many recalls are relatively routine, a small minority capture the headlines – usually where a major brand is involved, where there is a threat to safety (particularly children) and where crime is suspected (for instance in a case of malicious tampering or extortion). These recalls command much greater scrutiny and are much more demanding. They involve dealing with a larger set of stakeholders – politicians, regulators, industry bodies, the police and the media, as well as customers, retailers, suppliers and staff.

Companies that do the right thing and are successful in how they communicate usually emerge with their reputations intact, even enhanced. For those who do not, the media can be very unforgiving and it may take years to recover.

Preparation is everything. Make sure you have considered and assessed all the potential risks and taken steps to mitigate or negate them. Have plans in place that are up to date and tested, and professional advisers with relevant experience whom you can rely upon.  If you do ever face a recall situation, you will know how to approach it and what to do.