Product Recalls And Reputational Risks

David Fiske

Senior Vice President

Lori Hunter

Executive Vice President

July 11, 2019

A company’s brand reputation can take years to build — and be damaged quickly in the wake of a product recall.

Out of the top 20 priority reputational risks that every company should monitor, the Reputation Institute identifies five risks that are directly related to product recalls. They include:

  1. Reputational risks associated with the delayed reporting of product defects
  2. Mandatory product recalls
  3. Product fraud
  4. Repeated product recalls
  5. Utilization of toxic packaging


Today, as supply chains grow and the regulatory landscape becomes broader and more complex, a product recall can be one of the riskiest situations a company can face.

Despite the increase of product recall events, businesses continue to underestimate the impact reputational damage can have on a company. In addition to the physical expense of a recall, reduced sales due to poor consumer confidence, brand rehabilitation expense and potential shareholder lawsuits can also contribute to long-term losses. And while 87% of business executives surveyed believe that reputation is their largest risk area, only 19% percent of respondents think their business is adequately protected from a product recall event, according to a recent survey from Deloitte.

A brand that falls short of its values or loses the trust of its customers will very likely experience considerable fallout – whether that is loss of sales, partners, sponsors, endorsers, or investors (according to Risk & Insurance). The bottom line is that a product recall, large or small, can cause customers to think less of a business and its products. And while it’s impossible to avoid some degree of reputational damage in a recall event, companies that are proactive in their mitigation efforts to lessen the impact of a loss will have the best chance of coming back strong after a recall situation. One step towards mitigation is the purchase of a product recall policy which can provide coverage for rehabilitation expenses in the event a company does have to recall their product.

At Worldwide Facilities, we work with you to customize product recall coverage based on your client’s industry and product type — and that can mitigate losses associated with repairing and restoring a company’s reputation. For more information, please contact David Fiske at 312-465-5305, or Lori Hunter at 213-236-4585,

Looking for a specific solution?