Mattel Inc.'s recent recall of 21 million Chinese-made toys because of lead paint or detached magnets may have shocked manufacturers and parents around the world, but it was hardly the first time Chinese products were found to be dangerous. In June, toymaker RC2 Corp. recalled 1.5 million Thomas & Friends wooden railway toys made in China over concern about surface paints. Also in the last year, there have been recalls of everything from contaminated pet food, to defective tires, to spoiled toothpaste and lead-tainted jewelry.

The catastrophic event that crushed Mattel's reputation, disrupted its business continuity and resulted in a $30 million charge in the second quarter. For other companies, it was a wake-up call that globalization without uniform standards can lead to dangerous–and expensive–mistakes. "If I were a board member or a C-suite executive, I would be very conscious of risks associated with supply chains," says John Johnston, practice director of governance and risk management at Parson Consulting.

Many are. "Our phones have been ringing off the hook since the Mattel story first broke," says Michael Keating, senior manager of the business continuity practice at Protiviti Inc., which provides internal audit and business and technology risk consulting services. Fact is, notes Keating, responsibility for risk management has "almost overnight" moved from the IT domain to the business domain.