Many companies don't know where to start. That's simple, say consultants. Create an enterprise-wide committee to consider all possible mishaps that can lead to disaster, as companies do for any enterprise risk management (ERM) program. Most of the work is mental, though automation can help monitor potential problems once the threats are quantified. Dashboards with early-warning systems that flash red and green, for example, can signal a pending disaster, says Johnston. And software suites from Microsoft Corp. and IBM, among others, have business continuity tools.

But even the most sophisticated technology will be worthless if careful thought isn't put into creating and enforcing that can help avoid business continuity disruption. The No. 1 challenge, which should be part of any risk management program, is the scheduling of repeated and precise testing. In response to the Mattel recall that included Disney-brand Fisher-Price toys, Walt Disney Co. said it would run independent tests of its toys for lead paint and other safety issues, and require Mattel and other licensees to submit their own tests before their products go on store shelves.

To date, tests generally have not been carried out until it is often too late. Katherine Ann Cahill, global managing director for Marsh's Product Risk Practice, suggests, for example, that tests be conducted at foreigntrade zones, after goods arrive and before they are distributed in the U.S. Obviously, too, more supplier oversight is critical–but unwiedly when thousands of vendors are involved.

The most successful corporations will be those that have pre-established policies for everything from recall avoidance, to required contractual agreements to creation of product recall task forces. In the first case, says Cahill, a company must assess how it qualifies its suppliers, how it puts in place procedures to prevent a supplier from changing raw materials, and how it delineates precise tooling calibration protocols.

Contractual agreements can include material certifications, in which a supplier promises to meet, say, the international standard for steel strength. Problem is some certifications coming out of China or other overseas outsourcing locations may be fraudulent, says Cahill. "And, on top of that, there is no real way of enforcing these contracts," she acknowledges. "How do you extend the long arm of the law all the way to China?"

Another type of protection is an indemnification contract, in which vendors agree to pay for recall losses if they fail to meet specified standards. That can work if the partners agree to joint bank accounts and joint insurance policies.

If companies don't keep a closer watch on Chinese imports, the ubiquitous "Made in China" label may soon give way to products identified as "Not Made in China." The result for corporations will be higher costs and, perhaps, lower profits.