Multinational business insurance provider American International Group (AIG) has released an online tool designed to help local businesses prepare for the financial burden of a product recall.
NOVI, an innovative web-based service that can estimate the cost of recall incidents, was designed to address growing concerns over an increasing frequency of product recalls across Australia.
“There are on average, five product recalls reported every month in the food and beverage industry in Australasia, with two to three incidents occurring in Australia alone,” AIG Australia Crisis Management Manager Claire Richards said in an April 14 media release.
In 2013, there were 536 consumer level recalls in Australia. This is up from 480 in 2012 and 448 in 2011, which shows the financial burden of product recalls is on the rise.
While many people assume the cost of a product recall is limited to the direct expense of pulling products off the shelves, the overall cost is much greater. AIG warns businesses that these incidents can have a significant impact on profits due to damaged reputation and prolonged manufacturing delays, for example.
“Maintaining food safety standards and managing recall risk are two pressing issues for Australian companies and, through NOVI, we can now assist companies in quantifying a potential threat to their business so that they can manage their risk more effectively,” Ms Richards explained.
NOVI works by collating data input by business owners and creating a risk profile. From there, the team at AIG can estimate the potential cost of a product recall along your supply chain, including the expense of “replacement and destruction costs, lost profit from plant shutdowns, government intervention, loss of profits and brand and reputational damage”.
If you’re concerned about the impact a product recall could have on your business finance, get in touch with the team at MGA Insurance Brokers. We can help you find a relevant and comprehensive manufacturing insurance policy to help protect your assets from the burden of a product recall.