Product recall is an evolving risk for companies in all sectors, but perhaps none more so than the life sciences industry. Although a recall can be a daunting prospect, standalone product recall insurance coverage and access to the crisis management expertise it provides can give mid-sized companies the reassurance that they have the help to respond and rebound.
Life sciences is a growing sector of the UK economy with the UK government announcing in its Life Sciences Vision 2021 its bid to "incentivise and onshore high-value manufacturing capabilities in the UK".
Life sciences companies broadly fall into three categories: those that are involved in the production of pharmaceuticals; those that are in the business of manufacturing nutraceuticals such as supplements; and those that make medical devices such as surgical masks and gloves.
The nature of the products these companies make and market means that safety concerns will often require a product recall. And recalls can put a financial strain on a company, affecting cash flow and causing supply issues amongst other challenges.
Reputation is at stake too. In the case of supplements, for instance, buyers tend to be very loyal to a particular brand. And any safety-related product recall that breaks that loyalty and trust must be handled with care. The success of a recall is not only measured in financial survival, but also the extent to which a brand can recover after an event.
Managing the risks
Recall costs tend to account for a small proportion of the total costs incurred from the recall. The financial impact of a recall can include expenses such as the enforced closure of a factory for weeks by the regulator if there are concerns about supplier contamination. The loss of sales can be 'make or break' for some companies in the supply chain.
Other significant costs are the expense of advertising the recall, crisis management response and the need to enlist communications expertise to help manage and minimise any reputational damage amongst other things.
Crisis management
When a recall occurs, a swift, considered and effective response is vital to ensuring that financial and reputational risks are minimised. And it's important that life sciences clients, particularly mid-sized companies for whom this might be a rare but potentially critical event, have access to guidance and support through the process.
A unique part of a standalone product recall policy is access to the expertise of crisis management consultants.
Because they have such frequent contact with regulators, crisis management consultants understand how to communicate effectively in situations that might be a first and potentially daunting situation for a client.
Crisis management preparation can be of enormous benefit to help clients to understand how recalls work and how to respond. A proportion of the standalone insurance premium for buyers of this coverage is allocated to pre-emptive crisis management consultancy. Clients work with our exclusively retained consultants to undertake exercises such as mock recalls. This helps not only to ensure processes are in place, should an event occur, but it also gives clients the confidence and peace of mind that they have a response plan that they understand and have rehearsed.
Crisis management consultants can help clients to navigate the regulatory and PR environment after an event. They understand the requirements from the regulator; the nature of the questions that will be asked and the regulatory language. Because they have such frequent contact with regulators, crisis management consultants understand how to communicate effectively in situations that might be a first and potentially daunting situation for a client.
Communications response
In today's fast-moving environment, a quick social media response to advertise a recall is needed. This requires a different approach to a notice in a shop window, for example.
And while a social media response is instant, it's important to remember that digital communications remain online permanently, and are accessible long after the recall is over. That means the messaging must be right.
This is not an easy task and clients are not usually specialists in communications. A standalone product recall policy not only covers the costs involved in advertising a recall, it can give clients access to crisis communications expertise to help ensure that the messaging hits the right tone, is clear and minimises the reputational effects.
A collaborative approach
An early response to an event that triggers a recall can help to protect the public from any adverse effects. It's clearly in everyone's interests that recalls are done quickly.
A collaborative approach is key to getting this right. Working with our broker partners and our clients to understand the risks of this dynamic sector helps us to ensure that life sciences companies can put in place assessment, management and mitigating measures - and be ready to respond quickly and effectively should an event occur.
