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Crisis management plan crucial in product tamperings.

Crisis Management Plan Crucial in Product Tamperings Whether or not a company purchases insurance for product tampering, it is imperative to have a crisis management plan in place, according to David Little, director of the Bethesda, MD-based Control Risks Limited.

"A lot of companies believe insurance to be the end of the matter. In my opinion, it's the other way around," Mr. Little told RIMS members meeting in Calgary. "First, get yourself organized, put your plan together, and then go and get insurance."

Mr. Little said a crisis management plan for a product tamper incident should be prepared with the goal of obtaining a structured response. "The main problem when it comes to product tamper is time," he continued. "You want to structure things so you can respond very quickly. You want to make sure people involved in the plan are identified, your external liaisons are set up and that other plans associated with an incident are in place. The aim is to stop the crisis from becoming a disaster."

The effects of product tampering depend largely on the type of incident. Yet, Mr. Little said most companies, can expect adverse publicity, loss of sales, loss of confidence by their customers, suppliers, employees and shareholders, and loss of management time. In some incidents, companies may be forced to recall products, he said, and a limited recall over a short period of time can cost more than $20 million.

Mr. Little outlined three objectives for any crisis management plan: the protection of life and property, the termination of the incident, and the survival of the organization and its employees. In terms of communication, he said the plan should establish a system by which information gets from the employees to the executive suit, decisions are made, and then quickly reach employees again.

Some of the decisions, however, should be predetermined and stated in the crisis management plan. Questions that should be answered include: What type of media profile should the company take? Will the company pay ransom? To waht extent will control be given to the authorities? What element of risk is the company willing to run? When will it ignore the threat? And if it decides to take the threat seriously, how will it be handled?

When a product tamper incident occurs, companies are likely to face, Mr. Little said, conflicting information, a swarm of interested parties, including police, employees and press, conflicts of self interest and events which occur at high speed. He said risk managers should assume that if something starts going wrong, it will continue to go wrong until it is contained.

Mr. Little also said that a crisis management plan is essential for anyone in the food, beverage or pharmaceutical industries. He called product tampering a "copy cat" crime, citing statistics of the U.S. Food and Drug Administration, which recorded 129 cases of product contamination threats in 1985 and 1,692 threats in 1986 after the Tylenol tampering.

Mr. Little advised risk managers to keep an updated list of vital players, which may include major customers, wholesalers, retailers and members of the press. Most players should be directed to learn their "part" of the plan, he said. Most importantly, he added, the plan must have the approval of the chief executive officer because it will not get off the ground without it.
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Author:Oshins, Alice H.
Publication:Risk Management
Date:Nov 1, 1989
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