Product Recall, Business Insurance

Recall = Disruption

leavitt employees

Authored by an industry leader:

Joel Berrian, CPCU, ARM, AIC

How to Avoid a Disruptive Recall

Fahgettaboudit! Simply put, it is the nature of the beast. You can no more avoid a disruptive recall or a withdrawal than you can avoid a bad day. A recall is just that, a very bad, brand-hurting, budget-busting, regulatory-painful, extremely expensive, disruptive day, which is sometimes catastrophic. Be adventurous and survey the multitudes of companies that have suffered recalls. If you are really daring (We double dog dare you.), focus on the companies in your industry space. The best-of-the-best, the incredibly bad, the humongous, the very small, the industry standard, the start-up and many companies in between have experienced disruptive recalls. You will too.

The Source of a Disruptive Recall

Your company is awesome. Your company is profitable. You have an excellent team. Your operations are fantastic. You have great systems, policies and procedures in place. And, your company has not suffered a recall or withdrawal since you started operations! No doubt and it is why you are so successful. However, you will suffer a disruptive recall, because it is inevitable.

Because you are awesome, you have conducted risk analysis upon risk analysis to understand and prepare for all the causes or sources that may result in a withdrawal or recall. But, let’s be honest, could you possibly predict or identify every cause or source of a withdrawal or recall? Let’s be more direct, can you prevent every cause or source that may result in a withdrawal or recall? Candidly, the answer is no.

The possibilities are, literally, endless. Can you control your supply chain? How much control do you have over your supplier, co-packer or third-party manufacturer’s operations or even their supply chains? How much control do you have over your broker’s ingredient or product sourcing? If you are being honest, the answer is very little, if any. Sure, because your operations are awesome, you vet and audit. However, those efforts are usually 1 or 2 days out of 365. You have no more control over your supply chain’s daily efforts than you have over the weather. It’s maddening, it’s concerning and it’s true. Moreover, all it takes is one bad day and your supply chain, or even your own operations, can cause your brand and balance sheet a lot of pain. As veterans of hundreds of such events, we have seen the imagined and unimagined cause a disruptive recall. We have witnessed a best day-recall causing a few months of disruption and costing tens of millions to a bad day ending in catastrophic consequences.

Diminish the Disruption

Your company will suffer a disruptive recall. Nevertheless, you can properly prepare for and mitigate the disruption. Protect brand and balance sheet.

Joel Berrian is co-owner of Berrian Insurance Group and specializes in insurance for large risks with complex exposures such as mining and energy, product and professional liability, catastrophe exposed property, food and beverage, and global cargo and marine.