In today’s business climate, in particular for many industries that serve consumers directly — think automakers, consumer packaged goods manufacturers, or pharmaceutical firms — operate under the assumption that they’ll be subjected to a recall incident at some point. They can do everything possible to keep quality top-notch, or to keep suppliers in check, but they also spend a great deal of time planning for what is often inevitable. How will they pinpoint the problem and ensure that it is fixed as quickly as possible? How will they deal with the media? How will they deal with worried or frustrated customers?
And while many companies in various industries have asked and answered those questions and many more, there are plenty who have not. Florian Beerli, SVP of the ACE Group’s product recall underwriting unit, says he has seen awareness of recalls, and the subsequent planning process, change in the last few years, but the progress often hasn’t been enough. He says, “I think there’s still a lot of manufacturers out there who think, ‘I’ve never had a recall. It’s not going to happen to me.’”
Beerli equates a recall even to a major and unpredictable natural disaster, such as an earthquake. He says, “There’s no frequency, but there’s severity. A product recall can put a business out of business. It’s happened before, and it will happen again. Or it can have an impact on loss — not only on loss of profit, but also decreasing sales.” That doesn’t even take into account the potential loss of credibility, which is something U.S. automakers, for example, suffered from after a spate of high-profile recalls.