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Top 5 Recall Resolutions of 2016:Successful Recalls Begin with Proactive Preparation

JANUARY

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2Top 5 Recall Resolutions of 2016: Successful Recalls Begin with Proactive Preparation

Background

2016 has arrived, promising new opportunities for success and advancement – and the potential for a recall.

Developing a comprehensive recall plan may not be at the forefront of your thoughts as you dive into the new year and personal New Year’s resolutions. It should, however, be at the top of your business’ to-do list.

By adopting a few recall resolutions, your business will be better poised to effectively manage a recall crisis.

2016 Recall New Year’s Resolutions1. Expect a recall

2. Know your surroundings

3. Prepare, practice & protect

4. Be actively compliant

5. Insure your business

3Top 5 Recall Resolutions of 2016: Successful Recalls Begin with Proactive Preparation

Resolutions

This may seem like a dreary outlook on the upcoming year, but recalls happen more frequently than most man-ufacturers care to acknowledge. Nearly 2,300 recalls were implemented by the Food and Drug Administration (FDA), the Consumer Product Safety Commission (CPSC), the Department of Agriculture, and the National Highway Traffic Safety Administration (NHTSA) during Q1-Q3 of 2015. Close to 380 million units have been affected so far, with the final total still to be realized.

Time and time again manufacturers and retailers are caught off guard by recalls. Rather than having a plan in place

and being prepared to handle the very worst a recall could trigger, affected companies can only do their best to keep up with events, containing the damage as best they can.

Preparing for a recall is a proactive – and necessary – part of recall management. Those expecting a recall can do everything in their power to set up appropriate precautions and plans to mitigate potential damages. Likewise, this mindset better prepares manufacturers to act quickly in the event of a recall, to safeguard consumers, and protect their brand.

1. Expect a Recall

4Top 5 Recall Resolutions of 2016: Successful Recalls Begin with Proactive Preparation

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A majority of products are subject to regulation. While the CPSC governs the affairs of products like toys and textiles, the FDA oversees everything from vegetables to vaccines. Along with other regulatory bodies, they do much more than simply identify reasons for a recall; they pave the path for future innovations, protect consumers from illness and death, and establish industry standards and expectations.

Product standards can also vary greatly by country. But even within the borders of the same country, federal and local regulatory needs may differ. In some instances, what is legal at a national level is not always permitted at the state or county level. The same is true of regulatory

expectations. When a recall affects multiple geographic locations – whether on a national or international scale – its execution becomes more difficult to navigate. Fac-toring in the scope and span of potential events into your recall plan can make the task less overwhelming should an event occur.

Much can change over the course of a year. Make sure you re-familiarize yourself with the latest legislative dev- elopments and, if necessary, make appropriate adjustments to your business practices and recall plans.

2. Know Your Surroundings

5Top 5 Recall Resolutions of 2016: Successful Recalls Begin with Proactive Preparation

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Successful recalls often have two things in common: adequate training and a comprehensive recall plan. Both of these integral factors are often managed by an elected or designated coordinator who is responsible for establishing an internal recall team with a clear chain of command. Together, this team should develop and maintain a com-prehensive recall plan.

Resources should also be evaluated when building this plan. Do you have a call center? If so, determine its ability to handle large call volumes. What about your warehouse? In the event of a recall, affected product should be seg-regated from unaffected product and often stored for extensive periods of time. If there is any uncertainty in your resources’ ability to handle these capabilities, a third-party

recall expert can often provide additional support.

Preparedness doesn’t stop there. Teams should also hold mock recalls to train and practice recall execution. Similar to fire or tornado drills, these exercises involve laying out a probable recall scenario based on the type of product the company produces. From there, the recall team fol-lows each step in the plan, stoping just short of issuing notifications to retailers and regulatory bodies. Carrying out mock recalls can reinforce each team member’s role in the event of a recall, and will help identify gaps or flaws in the plan. An experienced third party can assist compa-nies with the execution of a mock recall and help identify additional areas that need improvement.

3. Prepare, Practice & Protect

6Top 5 Recall Resolutions of 2016: Successful Recalls Begin with Proactive Preparation

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Failure to adhere to established laws and regulations can be a costly mistake. Under the Consumer Product Safety Act (CPSA), companies are required to report possible defects, non-compliances, and hazards in their products to the CPSC. Often, fines are incurred when companies knowingly fail to report. When considering penalty costs, the CPSC evaluates the nature, circumstances, extent, and gravity of the violation1. Another factor that is taken into account is the size of the business and whether the penalty would have an adverse economic impact.

In 2014, nearly $5.2 million in penalties were issued. This figure almost quadrupled in 2015, with $23.4 million in

penalties issued – and the number and value of these fines are predicted to continue to rise in the upcoming year. The FDA2, NHTSA3, and other regulatory bodies have capabilities to leverage similar fines.

Taking proactive steps to ensure compliance can mitigate the risk of these fines. These steps include reporting poten-tial transgressions in a timely manner, following regulatory rules and regulations, and tracking appropriate data, and taking heed of customer complaints. Not only do these business behaviors protect bottom lines, they help preserve consumer safety and brand loyalty in the event of a recall.

4. Be Actively Compliant

1www.cpsc.gov2uscode.house.gov3www.nhtsa.gov

7Top 5 Recall Resolutions of 2016: Successful Recalls Begin with Proactive Preparation

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As a part of responsible business operations, organiza-tions obtain numerous insurance policies. But often recall insurance is overlooked. Depending on the policy, recall insurance can reimburse companies for certain costs in-curred during a recall such as loss of profit, consultant costs, and other recall-related expenses4. This indemnification can greatly assist manufacturers in returning to pre-recall business sooner rather than later. Most companies could benefit from recall insurance, especially businesses without the internal resources to handle the many costly aspects of a recall.

If product recall insurance is already factored into your business’ insurance portfolio, take the opportunity to evaluate your plan. Business needs, product offerings, and regulatory expectations frequently change over the course of the year. This could leave product recall insurance plans lacking necessary components or providing too much coverage. Reviewing policies on a regular basis is integral to ensuring appropriate coverage.

5. Insure Your Business

4www.hcc.com

Upholding Your Resolutions

© 2015 Stericycle, Inc.

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No matter how secure a company may feel in its products, even the most safety conscious manufacturers can suffer a recall.

Downplaying the possibility benefits no one and can have serious repercussions. All too often, manufac-turers find themselves unprepared for a recall, risking consumer safety as well as their company’s reputation and financial viability.

As many people set personal goals to lose weight, quit smoking, or get their finances in order, businesses should also take advantage of the fresh start the New Year offers. Resolving to develop a recall plan or to evaluate your existing plan can provide you with the peace of mind to focus on growing your business – and making 2016 your most successful year yet.