Thought Leadership

About the Toyota recalls

March 9, 2010

Toyota obviously is a huge corporation. They have the capability to have the risk management processes in place to avoid the pitfalls of smaller manufacturing companies. I do not know or understand all of their risk management systems and processes, so I can't speak to them from a knowledge perspective. I can address what typically happens as you work your way to#1. Many times (maybe not all the time) organizations begin to have a sense of invulnerability. This is most probably because profits have been going up and business risk has seemed to stay in check or leading indicators around risk have not shown any overt red flags. But at this time, when any organization is feeling that no bad can happen, is when the bad things happen. And they usually happen quickly and in a cascading way because that organization has reached a tipping point.

Is this what happened to Toyota? Its hard to say, but I can say that if operational discipline has not remained acutely high, during the good times, their luck eventually runs out. The false sense of security is a "human" phenomenon. We all begin to think we can do no wrong when nothing wrong happens for a long time. But that is exactly what lullsorganizations to sleep at the risk management wheel.

Now does Toyota (or any car manufacturer) have robust product risk management systems in place? If not, why not? If they do, then what happened to those warning systems?

Car manufacturers probably don't look at their risk management processes quite the same way as pharma or petrochem does. The pharma and petrochemhave all learned the hard way. Will the auto industry have to also learn the hard way?

I wrote an article a couple years ago around product stewardship and sustainability. Companies that do this well are able to manage both their internal and external risks. But it does take work and resources to do so.

So how does the auto industry get beyond this?

On the news a few days ago, I heard a U.S. auto industry exec saying that they were not going to make noise about what has happened to Toyota because they might end up someday in the same boat. Does this mean that they know that they all have inherent issues that need to be addressed around product risk management? The sooner manufacturers of heavy industry begin to copy the forward thinking risk management processes that the chemical, petro and pharma industries have used the better their products will be. Does this mean that using good risk management processes will make perfect cars and lead-free toys??

Maybe is the answer. But maybe is better than never going to happen.
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