HBR Zurich Counterfeits 2015
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Advertisement Counterfeit products have become a global phenomenon, affect- ing many industries around the globe. They pose serious health and safety risks to consumers, and cause costly damage to the brand and the bottom line of companies. Harvard Business Review recently talked with Tom Fioretti, Chief Risk Engineering Officer, Risk Engineering, Zurich North America, about the infiltration of coun- terfeit products in the global supply chain and how companies can assess and contain their exposure to these new risks. What is behind this new wave of counterfeiting and what is its impact? We saw the rise after the 2008 economic collapse as criminals sought new means to make money. They have been aided by technology, such as better-quality printing, fabrication, and packaging, which makes it easier to create fake goods that look like legitimate products. They can duplicate security controls such as bar codes and RFID tags, making it easier to move these counterfeit products into the supply chains. And they can transfer online funds quickly from country to country so the money is not traceable as the goods move about the world. Counterfeiting is an enormous global challenge, organized by highly sophisticated criminals who control manufacturing, distribution, and finance. It is an expensive problem for companies that make legitimate products—counterfeiters sell low-cost items and they don’t invest in research and development, design, marketing, and after-sales service. Counterfeiting also can damage an organization’s reputation, because those products don’t have the same quality, reliability, or durability of the real product. Fake products expose legitimate firms to increased liability, because their branded name appears on products that may cause harm to consumers. In addition, these products can increase the cost of product recalls, causing further damage to their brand and reputation. How do counterfeit products enter the supply chain “invisibly”? We’re seeing counterfeit products infiltrate the supply chain as intermediate parts or components. For instance, they may enter the stream of commerce as an illicit part of a car, a drug, or even a toy, without the knowledge of the legitimate downstream assembly point that puts it together. This means a defective fake piece can get placed in your legitimate product, sometimes with disastrous results: for instance, a counterfeit accelerator pedal can lead to a huge auto recall. In another case, prescription products were found to contain industrial solvents that were disguised as legitimate ingredients. This is obviously extremely dangerous to the consumer. What can organizations do to counteract the counterfeit challenge? Organizations need to understand the magnitude of the problem and the risks to their businesses. They need to assess what security controls are in place. They need to register trademarks and designs, and establish a robust culture around protecting intellectual property rights. This needs to become a board-level issue so everyone understands the potential damage, and boards need to provide proper funding and support to secure products from counterfeiting. At Zurich, we are continually assessing emerging risks around the world. We have people with the expertise to help companies assess their counterfeiting risks and develop policies and procedures. Companies cannot sit back and wait until something happens. By then it is too late. TO LEARN MORE ABOUT ZURICH RISK ENGINEERING AND THE FULL LINE OF ZURICH’S SOLUTIONS AND SERVICES, VISIT: www.zurichna.com ZURICH RISK ENGINEERING Counterfeits: Invading the Global Supply Chain The information in this publication was compiled from sources believed to be reliable for informational purposes only. Zurich is not providing legal advice and assumes no liability concerning the information set forth above.
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Transcript of HBR Zurich Counterfeits 2015
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Counterfeit products have become a global phenomenon, affect-ing many industries around the globe. They pose serious health and safety risks to consumers, and cause costly damage to the brand and the bottom line of companies. Harvard Business Review recently talked with Tom Fioretti, Chief Risk Engineering Officer, Risk Engineering, Zurich North America, about the infiltration of coun-terfeit products in the global supply chain and how companies can assess and contain their exposure to these new risks.
What is behind this new wave of counterfeiting and what is its impact?We saw the rise after the 2008 economic collapse as criminals sought new means to make money. They have been aided by technology, such as better-quality printing, fabrication, and packaging, which makes it easier to create fake goods that look like legitimate products. They can duplicate security controls such as bar codes and RFID tags, making it easier to move these counterfeit products into the supply chains. And they can transfer online funds quickly from country to country so the money is not traceable as the goods move about the world.
Counterfeiting is an enormous global challenge, organized by highly sophisticated criminals who control manufacturing, distribution, and finance. It is an expensive problem for companies that make legitimate products—counterfeiters sell low-cost items and they don’t invest in research and development, design, marketing, and after-sales service. Counterfeiting also can damage an organization’s reputation, because those products don’t have the same quality, reliability, or durability of the real product. Fake products expose legitimate firms to increased liability, because their branded name appears on products that may cause harm to consumers. In addition, these products can increase the cost of product recalls, causing further damage to their brand and reputation.
How do counterfeit products enter the supply chain “invisibly”?We’re seeing counterfeit products infiltrate the supply chain as intermediate parts or components. For instance, they may enter the stream of commerce as an illicit part of a car, a drug, or even a toy, without the knowledge of the legitimate downstream assembly point that puts it together. This means a defective fake piece can get placed in your legitimate product, sometimes with disastrous results: for instance, a counterfeit accelerator pedal can lead to a huge auto recall. In another case, prescription products were found to contain industrial solvents that were disguised as legitimate ingredients. This is obviously extremely dangerous to the consumer.
What can organizations do to counteract the counterfeit challenge?Organizations need to understand the magnitude of the problem and the risks to their businesses. They need to assess what security controls are in place. They need to register trademarks and designs, and establish a robust culture around protecting intellectual property rights.
This needs to become a board-level issue so everyone understands the potential damage, and boards need to provide proper funding and support to secure products from counterfeiting.
At Zurich, we are continually assessing emerging risks around the world. We have people with the expertise to help companies assess their counterfeiting risks and develop policies and procedures. Companies cannot sit back and wait until something happens. By then it is too late.
TO LEARN MORE ABOUT ZURICH RISK ENGINEERING AND THE FULL LINE OF ZURICH’S SOLUTIONS AND SERVICES, VISIT:
www.zurichna.com
ZURICH RISK ENGINEERING
Counterfeits: Invading the Global Supply Chain
The information in this publication was compiled from sources believed to be reliable for informational purposes only. Zurich is not providing legal advice and assumes no liability concerning the information set forth above.
