Sometimes, the sheer size of a story can catch you off guard. As news begins to filter through about yet another product recall by Toyota, the figures really don’t seem to match the tone of the reports. This has become such a common occurrence that people barely blink when they hear about the recall.

The thing is, they’re recalling nearly three million vehicles. The risks associated with that kind of recall are enormous. Even bigger when you consider they have recalled around 14 million cars over the last few years. Those figures are just a little mind-blowing and point to the need for some better risk assessment at the Japanese car makers. It also offers a reminder of the many ways a product recall can create business risks. Lets do our own quick product recall risk assessment and look at how damaging they can be.

Reputational Risk

The obvious risk, particularly in the case of Toyota, is the reputational risk. When people hear you have to recall a product it affects their trust in your brand. If you have more than one recall you run the risk of becoming naturally associated with product recalls and, as a result, faulty products.

Productivity Risk

The less obvious risk is the knock on effect of a recall like this. Good risk assessments look behind the immediate effect of a risk and assess the secondary and tertiary damage. In this case, a massive product recall will create more work and allow less time for the core business. Add to that an estimated recall cost for Toyota of approximately $500 million and that’s a huge dent in productivity and workflow.

Liability Risk

The other major risk associated with a product recall is the risk of liability. In Toyota’s case, there haven’t been any accidents caused by the current faults, but what if there were? Producing a product that directly causes injury or loss of life creates a huge liability risk. That risk would arise at a time when vital funds are already being pumped into the recall itself. That kind of drain could put a company out of business.

Each of these risks has a very simple and straightforward solution, get it right the first time. To achieve that, you need effective risk assessment, better manufacturing procedure and proper risk management.

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