Are you Prepared for a Product Recall?
Despite the frequency and high costs of a recall, most companies don’t adequately plan, prepare, practise for or buy insurance against product recall events. In addition to proper insurance covers, careful planning is essential in managing the risk of a recall.
First-Party vs. Third-Party Exposure
There are two categories of exposure to loss for a company faced with a product recall incident: first-party operational losses to the company and third-party liability losses to injured persons.
Unlike third-party losses, first-party loss is often overlooked. In addition to the initial recall expenses, the potential long-term losses from the damage to a company’s reputation and loss of sales may continue for months or even years. Since these losses can be catastrophic, this article focuses on ways to manage first-party incident exposures.
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