A product recall as a result of contamination, design faults, mislabelling or malicious tampering is one of the most risk-laden situations a company can face, yet it seems many Australian businesses don’t fully understand the potential impact a recall could have on their balance sheet or their stakeholders.

Contaminated food and beverage (F&B) products are usually destroyed rather than recalled, which means these incidents can have serious consequences for those involved if not handled well. A recall is a big hit to any company as it involves both direct and indirect cost outlays, which can include:

There's more pressure than ever before for F&B companies

Food and beverage companies on all sides of the fence – whether you’re a large or small manufacturer, retailer or wholesaler – are under more pressure than ever to deliver new products. As more locally and internationally sourced ingredients are being introduced and supply chains are becoming more complex, product traceability and contamination outbreaks are becoming harder to control.

As a result, product recalls within the Australian F&B industry (and throughout the world) are on the rise. According to Food Standards Australia (FSANZ), Australia has seen an overall increasing trend in F&B recalls since 2013, with the yearly average sitting at 79 (or 1.5 recalls per week).

 

Between 2013 and 2022 most of these recalls were due to undeclared allergens (44%) and microbiological contamination (25%).

These numbers highlight the importance for businesses to regularly revisit, review, update and implement effective quality control measures. Doing so will not only help minimise the impact a recall could have on your business, but it will also help ensure consumer health and safety is upheld.

Steps For Effective Product Recall Control (Plan, Prevent, Insure)

Planning

Planning is an essential component for any business to have the chance to succeed, and it needs to be applied across all areas, from design and product selection through to business operations and administration.
It is compulsory for all Australian manufacturers, wholesalers and importers of food and beverage products to have a plan in place in case of a recall.

This protocol by the FSANZ provides information on recalling food in Australia and guidance for food businesses on developing a written food recall plan. They've also produced various recall templates to arm F&B businesses with the right information and techniques should a crisis ever arise, including:

 

The Independent Brewers Association (IBA) have interpreted the full FSANZ recall protocol and adapted it to help out beer manufacturers, importers and suppliers within their industry. Click here to download the PDF. It is a great foundation for any food and beverage business, particularly those in the alcohol sector. However, the templates can be adapted to any industry.

By doing this, the IBA have armed each of their members with the appropriate collateral and tools to be able to complete, train and advertise their own recall plan. The information has been distilled into three sections:

 

Prevention

As product recalls continue to climb, we’re seeing more businesses starting to take prevention a lot more seriously, especially in Europe who withdraw an average of 22 products of the shelf each week.
Investing in an effective preventative solution means investing in high quality detection technology. But it’s vital that businesses select the right partner to work with who can advise, guide and update them on the best solution that’s right for them.

New, and often simple, detection technologies are being developed all the time and show great promise for businesses to be able to effectively combat any outbreaks or spoilages that currently fall under the radar. Advanced detection technology is a long-term investment and is a fraction of the cost compared to what you could pay if you had to recall a product.

The combination of proper planning and keeping up-to-date with the latest detection technology will help greatly reduce product recalls. Additionally, brand image, customer loyalty and advocacy are also maintained – and often improved – when companies show they are continually looking for new processes and systems that protect customers.

 

Insurance

Many food & beverage companies in Australia are under-insured when it comes to their product recall cover. In fact, 63% purchase less than the average cost of a recall, and 19% operate without this cover altogether. There is also a common misconception held by many small-to-medium businesses that believe product recall cover is included as part of the extensions they add on to their existing product liability policies. This is certainly not the case. Understanding the difference between the two is essential to ensure that you are not exposed to some of the major costs relating to a recall.

The above table outlines what’s covered under a product liability policy (with recall extensions added), compared to a tailored product recall policy. The key difference is that product liability insurance does not factor in protection should something go wrong on the manufacturing line.

 

Conclusion

Investing in the right product recall insurance cover is essential to all food & beverage businesses, particularly those who provide product to the major retailers – the more product and consumer reach you have, the higher your risk.

So be sure to check that you and your business are correctly covered.  Remember that simply adding extensions to your existing liability policy does not cover you in most areas included in a product recall scenario.

An ideal level of cover includes both Contaminated Products Insurance and Product Recall/Withdrawal Insurance. With this type of cover, you’ll be able to minimise the impact of a recall by covering the costs to investigate complaints, communicate the recall, collect, repair and dispose of the products, and recuperate lost profits, legal fees and penalties.

Product quality and safety are the shop window of a brand. Having the right level of product recall cover in place can ensure your brand remains untarnished, operational and successful.

 

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DISCLAIMER:
This article is informational only and should not be construed as individual advice as it does not consider your individual needs. You should consider if the insurance is suitable for you and read the Product Disclosure Statement or policy Wording before buying insurance.

As we roll into a new year and a new decade, the 'twenty-twenties' has provided scammers with a unique opportunity to forge documents and potentially defraud you.

Even though it’s common practice to shorten the year when writing down a date, doing the same abbreviation in 2020 could leave you open to all sorts of legal ramifications.

For example, adding a '21' to the end of an old / out-of-date cheque marked 01/02/20 could potentially reinstate its value. Similarly, an agreement to pay someone a monthly amount could be back-dated to 2018, meaning you might be liable to pay considerably more than actually required.

Scam 'artists' are aptly named for a reason - they're a clever bunch and will find loopholes to manipulate you where they can. So, don't take the risk for a fix that requires minimal effort. Err on the side of caution. Get into the habit of writing the year in full when signing and dating any legal and financial documents, such as contracts and cheques.

 

Where are the biggest problem areas?

Employment contracts

Abbreviating 2020 to 20 in your employment contract could cause problems when it comes to your entitlement to certain benefits if the date were to be amended to a year or two later. This is because a lot of benefits, (e.g. annual leave, sick pay, maternity pay), are determined by your length of service and your employer could get away with paying you less than what you’re entitled to.

Loan & payment contracts

Write the date out in full when entering into any new financial contracts. If a loan contract states repayment is to start 12 months from the date it was taken out (01/03/20), the year could easily be changed to 2019 by the lender or another party. This could lead them to demand repayment straight away.

Another way you could be caught out is if they backdate the contract, making it look like you’ve had the loan for a longer period of time so they can charge you more in interest.

Vehicle transfer documents

If you buy or sell a vehicle within 2020, it’s crucial you write the full date on any ownership or transfer documents. This is because the new owner could change the date on the documents to make it appear as if you were the owner of the vehicle at a time of any motoring offence, such as speeding, red light cameras, parking fines, or even criminal activity.

Tenancy documents

If you start a new rental tenancy this year, make sure you write the date in full when signing the rental contract. Problems could occur if the landlord were to change the date on the agreement to make it appear as if you lived in the property before you actually moved in, or even after having actually moved out. This could make you liable for damages to the property that occurred before or after you were living there.

Insurance documents

It’s important to make sure that all documents to do with any insurance policies show the right dates in terms of cover start and expiry dates. Writing an abbreviated date such as 03/03/20 could be easily altered by somebody else, leading to a lot of unnecessary problems should you need to make any claims.

Personal agreements & contracts

If you loan a friend some money and enter into any personal agreements or contracts with them, include the full date by which the money should be repaid by. If the date was abbreviated, then it could potentially be changed by the other party in order to add an extra year or two on to the repayment term.

 

Take a little extra caution this year and write out 2020 in full wherever it calls for it, because it will go a long way in ensuring you and your business are protected from back-dated fraudulent transactions and identity theft risks.

DISCLAIMER:
This article is informational only and should not be construed as individual advice as it does not consider your individual needs. You should consider if the insurance is suitable for you and read the Product Disclosure Statement or policy Wording before buying insurance.

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