A product recall can have long-lasting and costly consequences for your business – affecting your reputation, productivity, employee morale and bottom line. "Thirty years ago if you had a little problem, you were not going to get discovered. Now the chances of getting caught are significant, and it can be the end of your company," said David Acheson, consultant and former associate commissioner for foods at the U.S. Food and Drug Administration, in a Fortune magazine article.
There are several steps you can take to help prevent a product recall. In addition, having the right insurance coverage in place can help minimize the impact.
Know your industry
Familiarize yourself with product safety standards and regulations within your industry – and remember they may change with evolving trends
- Know the product safety standards and regulations within your industry
- Establish a compliance team to ensure you meet standards and laws
- Train employees to be sure they know product safety is a top priority
Scrutinize and verify all partners and processes within your supply chain
- Fully assess manufacturing partners, particularly foreign companies, before doing business with them, including checking claims and litigation history, requesting references, testing products manufactured for others, and confirming company's financials and insurance coverage
- Inspect all third-party parts, materials or ingredients before using them in your products
- Require that suppliers meet quality standards, pass quality audits by independent third parties, and sign contracts that hold them responsible for errors
Establish and conduct robust quality controls
- Perform quality checks at multiple points of the manufacturing process
- Have the quality control program audited by an independent third party
- Create an open culture so employees feel comfortable raising safety concerns
- Have a plan in place should a complaint or claim be filed against your company
- Retain records that allow traceability throughout the supply chain
- Perform mock recalls to test recall plans
- Consult your independent insurance agent to be sure you have the right coverage in place to help you recover from a product recall
The Hanover offers tailored product recall coverage for manufacturers, food industries, craft brewers, technology companies, retailers and more. Having the right insurance coverage in place can help minimize the impact of a recall by covering the costs to investigate complaints, communicate the recall, collect, repair and dispose of the products, lost profit, legal fees and penalties.
The impact of a product recall
Review our product recall infographic to learn more about how a product recall can affect your business and profitability.
Disclaimer: This article is provided for informational purposes only and does not purport to address every possible legal obligation, hazard, code violation, loss potential or exception to good practice.