Chapter 11: Technology

Technology has infiltrated almost every part of our personal and professional lives.  The world of product recalls is no different.

At its most basic level, the introduction of new technology has vastly reduced manual labour during production, which means – theoretically – there is less room for human error to occur. Fewer errors means, in many cases, the reduced risk of a recall.

Advances in technology has also made it possible to pick up issues much earlier in the production phase, avoiding the potential crisis of a product going to market with an issue that would warrant a recall.

At the back end, advances in technology have also made it easier than ever before to trace products to their final destination – a critical step in any product recall.

With the press of a button, companies can quickly identify what batch number went wrong, how many products were affected, where they were distributed and to what distribution network. New bar coding technology also helps makes tracking and tracing products and component parts much easier and more accurate than ever before.

Combined, this has meant that product recalls should be less onerous and more successful.

Samsung’s recent recall of its Galaxy Note7 mobile phones is a good example of how company’s today can use technology to their benefit during a recall incident.

Despite being a highly publicised event, Samsung found that many of its customers chose not to abide by the recall advice and had kept their smartphone despite the danger it posed of overheating and exploding.

Therefore, in an unprecedented move, Samsung worked with telecommunications providers to cut off the affected devices to ensure public safety.

This rise of ‘remote recalls’ could also impact the automotive industry, say experts.

In cars, for example, it’s not unforeseeable that manufacturers will soon be able to fix any minor issues or conduct vehicle repairs remotely – using the smart technology embedded within their systems. Glitches that previously had to be fixed by a physical mechanic may soon be able to be done by a data engineer at the company’s headquarters through a software update, for example. That could shave millions off recall costs, not to mention save distributors the time and hassle involved in managing the recall on behalf of the manufacturer.

Video: Implications of improved vehicle technology
Swiss Re Corporate Solutions’ Kevin Leung on the implications of improved vehicle technology for the insurance sector

There is a flipside to this, however.

As technology continues to improve, companies – and their products – are susceptible to new risks that could lead to them being recalled.

“With advances in technology, the face of product recalls and the potential exposures that could lead to a recall could change drastically,” Swiss Re Corporate Solutions Asia-Pacific head of casualty Kevin Leung says.

“For example, 10 years ago you would never have had a recall incident as a result of a cyber attack. Now with hacking, you could remotely hack the onboard system of a car and cause it to crash or you could penetrate thousands of toys by hacking in to a company’s server.

“You could have recall exposures that are not recognised, not addressed, or not even known.”

Perhaps one of the biggest technological advancements to impact product recalls in recent years, however, is social media.

Social Media 

Social media can be a friend or foe when it comes to a product recall.

On the one hand, the speed with which the transmission of messages can occur today is faster than ever before.

Thanks to multiple platforms and multiple ways to share a comment or story, a company conducting a recall today compared to even 10 years ago, will undoubtedly have a greater strike rate of alerting its customers of a recall incident of one of its products.

On the other hand, in a world where everyone’s a publisher, social media can also have its downfalls.

Messages about a company – true or false – can quickly spread across the world in seconds.

Aon Australia crisis director Karina Rodriguez-Diaz says the impact of social media should not be underestimated in a product recall event.

“In most of the losses that we’re seeing from our clients, the biggest come from the massive impact that social media has. In the past it was easier for a client to isolate the incident and manage it in a more quiet and controlled way. With social media now you have all the good news but you also have all of the bad news so it’s difficult for clients to control that.”

Willis Towers Watson head of corporate clients Mike Baker adds that this highlights the need for adequate product recall insurance.

“We must remember that at the base of this product it’s not just about actual proven recall, be it tampering or contamination, but it’s the threat of it. So therefore, somebody, somewhere in the world, through social media, can very easily damage a company’s brand and reputation even if there’s no actual foundation for the claims that are made,” he says.

Social media monitoring during a recall event is of utmost importance, particularly as it will often be the primary source of communication for many customers – and for many media outlets – during a crisis.

Lederer Group head of risk and insurance Avi Mudalier says it’s for this reason that it’s essential for companies to conduct comprehensive training on social media communication during a crisis and stress test this in a recall simulation event.

“You need to give [staff] parameters on what they can and can’t say [on social media], but at the same time you don’t want to impede the process of a timely turnaround. It’s not a simple case of ‘we’ve got a complaint, write something’. You’ve got to write something that’s meaningful, but not something that compromises the business position as well.

“Therefore, the individual or the team that’s responding need to be properly educated on how to address it.”

But, like many things, there are also risks associated with relying too heavily on technology and automation, says Mudaliar.

“Too many risk managers rely on data. They don’t necessarily listen to the business.

“So the advice to risk managers from my point of view is to be commercial in your approach and be mindful that not everything can be achieved just because you want it to be,” he says.

“As long as you’re informing people [of the risks], then the decisions that they’re making as a group are informed decisions.”

Video: Best practice and the common mistakes using social media
Product recall expert Steve Hather outlines best practice and the common mistakes using social media during a recall.
Chapter 10: The legal view

About the author

Lauren Gow, StrategicRISK

Lauren Gow is the Asia-Pacific editor, StrategicRISK

Welcome to The Journal

Welcome to The Journal, StrategicRISK ’s series of interactive online books for professionals in the corporate risk management and insurance sector. The Journal is published in partnership with Swiss Re Corporate Solutions. For more information about StrategicRISK click here.