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Dec
07

Who’s Afraid of a Big, Bad Regulator?

When a company is about to initiate a recall, regulators may seem like the enemy – ready to pounce at the slightest misstep. But the reality is typically very different, and this viewpoint can actually make the situation worse. A better approach is to work closely with regulators and position your company as a partner, rather than an adversary. Here are some steps to go about it:

  1. Act fast. One of the most common mistakes companies make is also one of the worst: waiting too long. It is important to understand that alerting the relevant regulatory bodies of a potential issue doesn’t automatically trigger a recall. And if a recall is necessary, it almost certainly can’t be avoided, only delayed. This can lead to distrust, additional scrutiny, and ultimately, hefty fines. Reporting the hazard quickly demonstrates to regulators a company’s concern and commitment to making things right, and there is no better way to begin the relationship.
  2. Be transparent. No matter how quickly you tell regulators about the issue, it won’t help if you aren’t upfront about the true nature of the situation. Now is not the time to spin or sugarcoat. Remember: you’re not the first company to go through this. Be prepared to divulge the potential hazard and how it was discovered, the likely scope and scale of the issue, and any reported injuries or adverse reactions – even if it is unclear that the product is the true source of those reports.
  3. Develop a notification plan. The number one concern in any potential recall situation is consumer safety. To protect the public, a comprehensive notification plan is necessary. Direct notification only to those impacted is best, but when that is not possible, widespread announcements are necessary. Regulators expect to see a plan that meets, and ideally exceeds, their requirements.
  4. Ensure your actions match your words. A robust plan is vitally important. But it is also meaningless without follow-through. In order to act as a true partner, companies must act on their plans efficiently, knowing that regulators will be watching closely – even looking at response rates to determine whether additional steps are necessary.
  5. Offer an appropriate remedy. Too often, companies are more concerned with short-term costs than long-term results. They may try to get by with an inadequate repair or partial refund. In some cases, regulators may reject these proposals right from the start. In other instances, companies are forced to expand or alter remedies when the first ones prove insufficient. On top of the consumer safety implications, these companies may be obligated to reannounce the recall several times, exposing them to even more scrutiny. Instead, companies should consider the perspective of their customers. What would inspire them to take action? What remedy options would make it clear that the recall is serious? By looking at it from the consumers’ point of view, companies are better able to satisfy regulators as well.
  6. Know the mandates – or work with someone who does. When it comes to regulatory compliance, the devil is in the details. This is often the greatest source of apprehension when a company faces a recall. Even small, geographically limited recalls involve highly complex regulations. When recalls expand to a nationwide or even global level, the complexity is compounded. Every form, piece of data, and step in the process must be managed with painstaking care. That requires a thorough understanding of mandates from the various regulators who may be involved at every level.

A recall – or even the prospect of a recall – can be frightening. But by confronting the fear head on and embracing the role of the regulator, companies can position themselves for recall success.

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