Product recall is one of the greatest setbacks for NSW businesses. And we’re not just talking about financial damage through lost sales but also reputational risk. It is difficult to quantify the cost of a product recall to Australian businesses as there are so many components to consider. For one, you have immediate advertising costs to alert consumers to your recall. You also have to factor in transport and disposal or repair of your recalled product, fines that you may incur and replacement products.
Product Recall in NSW
The Australian Consumer Law (ACCC) found there were 670 product recalls in the 2015/16 financial year, up from 596 the previous year. Cars topped the list of recalled products at 182, followed by food and groceries (123), Electrical and gas (80), Hobbies, sport and recreational products (79), IT, phones and multimedia (11), and so on through fashion, industrial and veterinary products.
It seems no industry is immune and the penalties can be enormous. Last year, for example, Woolworths was ordered to pay a $3 million penalty for selling faulty Homebrand goods. While Woolworths is a big company with a large budget, the penalties can equally apply to smaller businesses, whose ability to absorb such vast fines would be almost catastrophic.
In NSW, companies can prepare for product recalls with the help of a certified insurance broker. At Emjay Insurance Brokers, we handle incident management planning, including a crisis management communications plan. Our team also executes a post-recall marketing plan to expedite recovery time.
In addition, we audit, streamline and review NSW companies’ processes in order to minimise the risk of a recall. No matter how much planning you have done, the circumstances for each product recall are different, and sometimes the resultant recall defies all predicted scenarios.
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In conclusion, one way to minimise liability is to ensure companies are insured against any type of product recall. It is important to choose a policy that will cover actual product loss and recall expenses, as well as marketing strategies to rebuild the brand and ancillary costs for sufficient recovery.
To understand the risk facing your business, contact Emjay Insurance Brokers and speak with our expert brokers. We can provide you with advice and services to ensure your NSW business is managing the risks of a product recall. With us on your side, you are adequately insured and protected, significantly reducing negative impact should the worst happen. Contact us on (02) 9796 0400 to discuss your needs.