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Product Recall Risks Growing In Size & Number, Technology Drives New Triggers- Allianz

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By peter oluka

Defective product risk is an increasing peril for companies, causing significant financial damage, according to a Allianz Global Corporate & Specialty (AGCS) report.

A faulty pedal causes a car to inadvertently accelerate. An outbreak of contaminated peanuts results in a 25% industry-wide reduction in sales. Each of these incidents triggered major product recalls, resulting in billion dollar losses.

Product-related risk is one of the biggest perils facing businesses today, with recall exposures having increased significantly over the past decade, bringing the potential for larger and more complex losses than ever before, warns insurer Allianz Global Corporate & Specialty (AGCS) in a new report.

It highlights the automotive industry as being the most impacted by product recalls, followed by the food and beverage sector, based on analysis of insurance claims.

“Product recalls have risen steadily in the past decade. We are seeing record levels of recall activity in size and cost today,” said Christof Bentele, head of Global Crisis Management at AGCS. “Tougher regulation and harsher penalties, the rise of large multi-national corporations and complex global supply chains, growing consumer awareness, impact of economic pressures in research and development (R&D) and production and even growth of social media are just some of the contributing factors behind this.”

Defective products not only pose a serious safety risk to the public but can also cause significant financial damage to the companies responsible.

Defective product/work-related incidents have caused insured losses in excess of US$2 billion over the past five years, making them the largest generator of liability losses, according to analysis, of insurance industry claims by AGCS.

Recall claims are a major contributor to this total, alongside product liability claims.

The report “Product Recall: Managing The Impact of the New Risk Landscape” analyzes 367 insurance industry product recall claims from 28 countries across 12 industry sectors between 2012 and the first half of 2017.

Overall defective product or work is the major cause of recall claims, followed by product contamination. The average cost of a significant, incident is in excess of US$12 million (€10.5 million), with the costs from the largest events far exceeding this total.

Over 50% of losses arise from 10 incidents. The IT/electronics sector is the third most affected industry after automotive and food and beverage, according to the claims analysis.

Automotive recalls most expensive and large-scale due to “ripple effect”

Automotive recalls account for over 70% of the value of all losses analyzed, which is unsurprising given recent record levels of activity in both the US and Europe.

“We see an increasing number of recalls with higher units in the automotive industry,” said Carsten Krieglstein, regional head of Liability, Central & Eastern Europe, AGCS. “This is driven by factors such as more complex engineering, reduced product testing times, outsourcing of R&D and increasing cost pressures. The technological shift in the automotive industry towards electric and autonomous mobility will create further recall risks.”

One of the largest recalls to hit the auto industry to date, involving defective airbags, is expected to result in some 60 to 70 million units across at least 19 manufacturers being recalled worldwide. Costs have been estimated at close to US$25 billion.

This incident exemplifies the growing “ripple effect” which impacts the automotive sector, but also other industries. Given the use of many common components, a single recall can impact a whole industry.

Food and beverage is the second most impacted sector, accounting for 16% of analyzed losses with the average cost of a significant product recall claim almost US$9.5 million (€8 million). Undeclared allergens (including mislabeling incidents) and pathogens are a major issue, as is contamination from glass, plastic and metal parts.

Malicious tampering and even extortion incidents pose an increasing threat, as well as the growth of “food fraud”, which has become a major issue, resulting in reputational damage and major losses, as seen in the horse meat scandal in Europe four years ago.

The report also notes that products from Asia continue to account for a disproportionate number of recalls in the US and Europe, reflecting the eastwards shift in global supply chains and historically weaker quality controls in some countries.

Yet increasing safety regulation and consumer awareness is ensuring recall activity is also rising across Asia.

Allianz Global Corporate & Specialty Product Recall Risk Cyber

Technology to prevent and drive future recall risks

The report also identifies emerging recall triggers that will drive future risks and claims, largely stemming from new technologies.

Advances in product testing such as genome-sequencing technology will make it easier for regulators and manufacturers to trace contaminated products in future, potentially saving lives, but also potentially spiking litigation activity, as liable parties can be more easily identified.

Cyber recalls may become an increasing reality. Hackers could change or contaminate a product by controlling machinery in automated production plants.

“Cyber is currently an underestimated risk,” said Bentele. “We have already seen recalls due to cyber security vulnerabilities in cars and cameras.” Innovative but untested technologies such as artificial intelligence and nanotechnology could also transform recall risk.

Social media is a fast and effective way of communicating with customers but can also exacerbate recall risk if not well-managed. “Social media is a real game-changer for product recall,” says Stewart Eaton, Head of Product Recall, UK, AGCS. “An erroneous post or tweet can cause reputational damage and directly impact the size of a recall, meaning companies need to react faster than before.”

Recalls for ethical and reputational, rather than safety, reasons are also on the rise, such as in cases where child or slave labor has been used in the supply chain or where food such as halal or vegan has been mislabeled or counterfeited. “There will be incidents when there is no legal requirement to recall but it is the right thing to do. This is a genuine business risk which companies have to be prepared for,” Bentele said.

Pre-event crisis management as part of corporate DNA

Pre-event planning and preparation can have a big impact on the size of a recall and the financial and reputational damage sustained.

As part of a holistic risk management program, specialized product recall insurance can help businesses recover faster by covering the costs of a recall, including business interruption. It also provides access to crisis management services, and consultants, which can test a company’s procedures and offer global support in areas such as regulatory liaison, communications, product traceability and tampering investigations and even genome sequencing and DNA testing to understand a product contamination.

“There is now much more attention on how companies deal with defective or contaminated products, how responsive they are and how resilient their safety systems are. More than ever consumers are also part of the agenda and are driving company behavior by making their choices subject to how companies deal with crises. A company that embraces crisis management, and makes it part of its DNA, is far less likely to suffer a major incidence,” said Bentele.

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NCC to Sanction Illegal Auto Tracking Solutions Providers

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The Nigerian Communications Commission (NCC) has warned against illegal operation by automated vehicular tracking (AVT) operators, saying it would invoke sanctions against anyone operating without licenses.

Emilia Nwokoro, Enugu Zonal Controller of the Commission, disclosed that it was illegal for people to operate vehicular tracking services without registering with the commission, stressing that registration would help regulate their services.

Speaking during the unsealing of the D-Tech Multi Services, she stated that the commission’s enforcement procedures empowered it to seal off AVT services operating without license, explaining that D-Tech Multi Services was sealed off on October 31, last, following the refusal of its managers to regularize their operations with the commission.

She explained that the aim of registering the operators was to enhance security of services and ensure that vehicle owners deal with genuine auto- trackers in the state and called on members of the public to furnish her office with information concerning illegal operators in the state.

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Africa Code Week frenzy hits Nigerian teachers, youths

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Deputy Governor of Enugu State, Mrs. Cecelia Ezeilo with teachers at the ACW teacher training in Enugu, recently.

Africa Code Week (ACW), a continent wide initiative of SAP, supported by partners such as Google, UNESCO, BMZ, Camden Trust, Cape Town Science Centre is set to run for 2 weeks from today the 15th to 26th October, in schools, communities and ICT centres across Nigeria.

 

It’s envisaged that hundreds of thousands of students will be trained on coding language during the 2-week period.

 

Training will be carried out in many States across the country as many teachers have been ramped up through a series of TTTs carried out by SAP and some of the ACW Network Partner Organizations (NPO).

 

Notably, in Edo and Enugu states where TTTs recently took place in August and September respectively, the events were organized by SAP and coordinated by ACW NPO Coderina.

 

The governments of these states have already thrown their full weight behind the program with a common goal of ensuring that all students in post primary education are introduced to coding during these 2 weeks.

The training session for teachers

 

They believe that success will be achieved through a combination of plans put in place by the government to leverage the newly acquired knowledge of the teachers and support from NPOs.

 

In Edo State, for instance, the government working through the Chairman of Edo State Post Primary Education Board (PPEB) Mr. Gabriel Oiboh and the Director of ICT agency Ms. Yuwa Napps,  have set aside 38 ICT centers in schools across the state to cater for students in schools where there’s lack of or shortage of computers.

 

The government ICT center with over 300 computers will also be used to train students in batches, with students transported to the center by government vehicles.

 

The approach is also similar in Enugu State where a team led by the SSA to the Governor on Development Aid, Dr. Kingsley Udeh and his ream, acting under the instructions of the Executive Governor, His Excellency, Rt. Hon. Ifeanyi Ugwuanyi, plan to reach every student in post primary education and ensure that no child is left behind.

 

The Governor in his address delivered on his behalf by the State’s Deputy Governor, Mrs. Cecelia Ezeilo at the ACW teacher training in Enugu, stated that youths are the engine of economic growth in the State hence digital literacy powers this engine.

 

“That is why my Administration has sought and attracted to the State this largest digital literacy initiative ever organized on the African continent”.

Some of the teachers who participated in the training

 

“Enugu State Government is committed to working with stakeholders towards achieving sustainable and inclusive economic growth through digital literacy.

 

“This software coding training therefore comes as a welcome complement to the various ICT development initiates of the State Government.

 

“We will want to work with SAP and partners to infuse software coding into our school curriculum, in line with our ICT policy”, the State Government said.

 

According to the National Ambassador of Africa Code Week Olajide Ademola Ajayi at the TTT in Enugu, “It is highly anticipated that government interest in the program will help move the needle on Nigeria’s Digital Literacy drive.”

 

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MTN Shines, Bags Five Awards at NTITA 2018

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Tobe Okigbo, Corporate Relations Executive, MTN Nigeria, cluching the Awards

MTN Nigeria over the weekend emerged the biggest winner of the night at the 2nd edition of the Nigeria Tech Innovation & Telecom Awards (NTITA), 2018, held by the Instinct Wave and Association of Telecom Companies of Nigeria (ATCON) at the Oriental Hotel, Ikoyi, Lagos.

 

The ICT Company carted five (5) awards – Telecom Company of the year, Social Impact Award, Digital Transformation Award, Customer Experience Award and Telcom CEO of the year awards.

 

Tobechukwu Okigbo, Corporate Relations Executive, MTN Nigeria, who was one of the executives present for the company, received the awards and expressed the organization’s gratitude to the organizers and the independent judges.

 

“We are honored to not only receive these but to have been considered nominees in such lofty categories.

 

“MTN Nigeria has always and will continue to strive for excellence in all frontiers.

 

“Recognition for the work that thousands of us come together for every day is incentive to do more, create more and be more,” he stated.

 

Akin Naphtal, Group Chief Executive Officer, Instinct Wave, explained that the prestigious award has quickly become the benchmark for outstanding performance and a symbol of excellence in leadership in the highly competitive technology industry.

 

The award which is in its 2nd edition, has judges formed from an independent panel of industry experts recognizes organizational performances products and services, innovations, executives.

 

 

 

 

 

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