Product recalls: Obligations and opportunities

  • Responsibility for product safety rests with each link in the supply chain — not simply the manufacturer or the retailer. 
  • In the event of the product recall, companies must prepare and submit a recall strategy to the ACCC.
  • Special considerations apply to listed companies, because of their continuous disclosure obligations.

Business man holding product recall sign

Few events have greater impact on a consumer product supply chain than a product recall.

In deciding whether or not to issue a product recall, the stakes are often high for board and executive management — and ramifications can also be severe for employees, contractors, suppliers and distributors.

Issue a recall and suffer brand and reputational damage, lose market share, suffer financial loss and risk personal embarrassment. Don’t issue a recall and risk all those consequences — and more.

The recall decision matrix is mired with pros and cons — ethical, strategic, financial, insurance, legal and personal. Ask anyone who has sat around a boardroom table weighing up this decision.

It’s an adrenaline rush directors and executives can do without.

Businesses perceived to lack adequate product recall preparation pay a hefty price. Perhaps surprisingly, Toyota, the world’s largest car manufacturer, is also credited with some epic recall disasters — millions of recalls of different vehicles for different reasons and a widely criticised recall strategy leading many observers to conclude its brand has suffered considerably.

Most large businesses are prepared. Dell recalled 15 per cent of its laptops in 2006, costing an estimated $400 million, while Tesla recalled nearly 90,000 vehicles in 2015. The stock prices of both companies took a short-term hit — but both recovered quickly, with corporate reputations intact.

Exceptional businesses also look for strategic opportunities.

But — before looking for the opportunities, it pays to know the basic requirements

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