The Top Three Risks of Counterfeit Products

August 31, 2013
Categories: Counterfeit resources:

Counterfeit products have serious consequences for companies. They can harm a brand’s reputation for quality and safety, physically harm customers if they work improperly, and cause business disruptions if found in the supply chain of manufactured goods. Although a company might not be able to protect itself 100% from counterfeit goods, it can put in place policies and procedures to mitigate these top three counterfeit risks:

3)      Counterfeit Components in the Supply Chain:

Counterfeits in the supply chain, from trademark and design right violations, can produce serious product quality and security problems, consumer safety concerns, and financial risks for your business.

How to mitigate the risk:

  • Institute clear policies, procedures and contracts prohibiting procurement of counterfeit items and regulating use of trademarks and designs. This can include trademark use procedures and design guidelines, and contractual provisions that cover licenses, use, and redress related to trademark and designs issues.

2)      Counterfeit Software:

Unlicensed or counterfeit software can create many problems for businesses. Unauthorized copyrighted material may contain viruses, other destructive code, or worse yet, security-breaching features that provide unauthorized access or confidential data to third parties.

How to mitigate the risk:

  • Implement copyright-related management policies and procedures, including commitments and mechanisms to use and manage copyrighted material properly, both internally and among suppliers. Implement relevant standards, such as for software asset management (e.g., ISO 19970) and information security (ISO 27001). The Business Software Association (BSA) offers a software asset management program called Verafirm, which is suited for small and medium-sized companies:

1)    Defective/Counterfeit Products Pose Safety Risk to Customers:

Counterfeit designer handbags and luxury watches are first to come to mind for most people; however, counterfeits cross all product categories including pharmaceuticals, spare parts for airplanes, automobile airbags, and electronics. All of these products require strict component regulations and safety standards which when ignored can lead to explosions, fires, electric shocks, network crashes, and even physical injury and death.

How to mitigate the risk:

  • Conduct adequate risk assessment in supplier selection, which takes into consideration a range of relevant factors including country, type of product, public information, historical performance, and presence of management systems.
  • Maintain good supply chain management and monitoring, including regular checks of product and component security and compliance, feedback on customer complaints and returns, and market monitoring.