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:
- Reputational risks associated with the delayed reporting of product defects
- Mandatory product recalls
- Product fraud
- Repeated product recalls
- 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, firstname.lastname@example.org or Lori Hunter at 213-236-4585, email@example.com.