Product Recall is a Prime Example of a Risk That Should be Managed Through a Risk Financing Facility
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Remember when you were a kid traveling by car with your family and the issue of "clean bathrooms" was of prime importance when looking for a place to stop? Buc-ee's solved that problem. If you are ever driving between Texas cities (which Texans do regularly), Buc-ee's has become the stopping place because of their attention to cleanliness. Buc-ee's is also a great store. They use the Costco HR strategy -- pay your people well, thoroughly develop their talent, and they will actually work more efficiently. Trust me -- it pays off in spades.
I feel the personal need to begin this blog post with a thorough defense of the chain because Buc-ee's recently had to recall a product, which is never a good development. However, it's part-and-parcel of running a retail store. Let's look at the the potential costs associated with this event:
This is a complicated risk. Not only should a company develop a customized plan for dealing with it (because it's not a matter of if but when it will happen) but it should also develop a specialized plan to deal with it. And that's where a customized risk financing facility comes into play. It allows the company to have a good idea up front how to pay for this eventuality.