Increased oversight of product recalls expected

The Australian Competition and Consumer Commission (ACCC) has released its product recalls in Australia review, producing implications for consumer good companies.

The review indicated that regulators, such as the ACCC, will be expected to be more active following one finding that recalls were more effective when regulators were actively overseeing it.

RQA Asia Pacific said while oversight might be seen as a burden, companies with product recall strategies should have nothing to be concerned about.

Steve Hather, RQA Asia Pacific managing director believed many of the key concepts of an effective product recall strategy highlighted in the ACCC review will find their way into these new international standards.

Due for release in 2012, the review paper will place emphasis on the importance of effective communication and the use of range of performance indicators to measure effectiveness.

According to RQA, the ACCC review said improving return rates is an objective of any effective recall process and the way to do this is to provide a more adequate form of communication to consumers. Companies would be expected to target consumers through online outlets, such as blogs and other social media. The messages also need to be more explicitly conveyed in terms of actions consumers need to take and what the companies’ intended actions will be to ensure a recall is well executed.

Additionally, as well as improving product return rates, companies need to be able to track the affected product, report on communication efficacy, product destruction or repair and measure any reduction of injuries or complaints. This sort of information must be included in updates and final reports to the ACCC and other regulators. This data will help determine when a recall can be considered complete.

Another key message from the ACCC review is that companies need to be prepared. The effectiveness of any recall is reliant on the robustness of the systems a company has in place that to identify that an incident has occurred, to effectively and efficiently investigate the incident, assess the risk, trace the affected product, communicate effectively with key stakeholders and effectively implement and monitor the recall.

Tracie Thompson of Chartis International said the only way to survive any crisis, including product recalls, is to plan ahead financially.

“Many companies are impacted severely in a crisis because they are unprepared; a well prepared first response to a crisis is crucial and is an integral part of a company’s strategy,” she said.

“The practical and physical costs of withdrawing a product from the stream of commerce include inspection, destruction and replacement of a defective product. But the cost to a company’s reputation can be significant and can have a detrimental effect on a company’s bottom line, regardless of company size”.

Research carried out by Melbourne University in 2004 concluded that the typical cost of a crisis is $10 million; however 25 per cent of crises cost over $100 million.

To help optimise risk management Chartis International offers expert advice and product recall and crisis management planning through RQA Asia Pacific.

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