The pharmaceutical & Life Sciences industry has always been associated with groundbreaking trials, discoveries, and innovation. However, this experimental work also exposes pharma companies to an exorbitant amount of risk. High risk areas include clinical-trials, product design & production, drug approval, product quality, and adherence to global commercial practices. These risks must be carefully monitored & addressed to prevent reputational damage and ensure long-term sustainability of their products.
Most pharmaceutical & Life Sciences companies have some degree of risk management in place. But they openly admit their analysis and management of risk is not as robust, data-driven, action-oriented, or far-reaching as it could be due to manual processes, poor quality data, and siloed systems. The need for data-driven innovation to monitor risk has led to many companies to upgrade their risk management processes by implementing an integrated GRC platform.
In this blog we look at why breaking away from a siloed mentality is important, we explore the top risks facing the pharmaceutical & Life Sciences industry and explain how technology can support organisations to adopt an integrated approach to risk management. Amidst an ever-growing list of challenges & risks, pharmaceutical companies are looking to build resilience and agility so they can continue to develop lifesaving solutions for patients without interruption. GRC software provides the structure & clarity they need to; address risk, deal with a complex regulatory environment, and produce data driven insights to support risk-based decision making.
Top Risks Facing the Pharmaceutical & Life Sciences Sector
In 2023, inflation is the top concern for the pharmaceutical industry – according to a survey by Global Data Healthcare. The poll showed executives placed inflation first with drug pricing & reimbursement constraints second, the Ukraine conflict third, and the political divide in the USA fourth among the top challenges hampering growth in the sector. Inflation and increases in demand have seen several medical devices manufacturers struggle to produce parts with a shortage of semiconductors as well as specialised metals, plastics, and resins. Thanks to these shortages, the previously resilient medical device sector experienced lower year on year growth in 2022.
Rising operational costs were a growing concern for the industry throughout 2022, and the idea that this sector is ‘recession-proof’ because of the growing demand for medicines especially for the ageing population is being put to the test. Increases in raw material costs are also set to make supply chains more expensive during the year ahead. According to recent research, raw material costs have increased by 50-160% in Europe forcing drug manufacturers to re-evaluate their supply chains to bring down costs and ensure continuity.
Geopolitical risk remains on the radar, as even the most established and reliable supply chain networks were shaken by the geopolitical tension of the past 12 months. The war in Europe has had a significant impact on the cost of raw materials in the sector mainly due to scarcity of resources and the rising cost of energy.
In addition to these factors, pharmaceutical companies must also consider rising competition across most therapeutic areas and a string of patents that are due to expire, plus they must consider the impact of the Inflation Reduction Act (IRA) of 2022. A recent PwC survey revealed that 90% of executives are concerned about macroeconomic conditions in the current business environment.
When it comes to data breaches and cyber-attacks the threats for pharmaceutical companies are two-fold. As more internal operations become highly digitised – the risks of losing mission critical digital assets to corporate cyber espionage and ransomware attacks rises too. Secondly, as the industry becomes more personalised and customer-centric, a greater amount of customer data is being stored and manipulated in the cloud. Pharma companies, who have been entrusted with this data, must take steps to ensure its security through effective cyber risk management and must have robust plans in place for what to do in the event of a data breach or ransomware attack.
In 2022, the healthcare sector including pharmaceutical organisations took a major hit with cyberattacks. The industry will remain a target for cyberattacks this year and will require smart pharmaceuticals to undertake extensive due diligence in increasing cyber security – adopting a zero-trust cyber security model when it comes to current and potential third parties.
Due to the frequency of natural disasters across the globe increasing almost threefold over the recent decades, pharmaceutical companies need to be aware of the impact that climate change can have on their operations. Unfortunately, extreme weather events will only become more frequent with global warming – meaning the pharmaceutical sector must be ready for risks caused by climate change!
While dealing with the ongoing effects of the global pandemic has continued to put unending pressure on the industry, pharmaceutical & Life Sciences companies will have to continue to deliver for patients and investors against a backdrop of significant inflation, rising capital & energy costs, talent shortages, an ongoing health crisis, a reduction in consumer spending, and challenging foreign exchange impacts – making risk management a key consideration.
Barriers to Effective Risk Management
A major barrier to effective risk management for most pharmaceutical companies is the existence of silos and the use of manual processes & spreadsheets with no formalised risk framework. This leads to organisational fragmentation and inaccurate risk data.
In the quest to minimise day-to-day risks, most pharma companies also leave risk management to be carried out at a departmental level. Leaving each area of the business working with its own data to monitor & manage the risks that directly affect them – often using different risk ratings & categorisation with no cross functional mapping. When it comes to devising the response to these risks, each function is somewhat self-serving, absent of the right insight across the organisation (both upwards and downwards) to know the right thing to do for the whole enterprise. This prevents the risk team from getting a consolidated view of risk – making it difficult to advise the board on the most critical risk areas that should be allocated funding & resources.
This disjointed approach can create cultural issues that stifle innovation and improvements. The fear of falling foul of regulations or ‘taking risk’ can drive risk-averse behaviour and mean people follow the audited process, rather than challenging in areas when efficiency gains could potentially be achieved.
Managing risks in silos using manual processes like spreadsheets & emails can lead to a slew of other issues as well, such as duplication of risk mitigation efforts, gaps in risk analysis, inaccurate risk data, a lack of a process to aggregate critical risks, and limited sharing of risk information across organisations – all of which can make it difficult to understand and manage the key risks confronting a company. While pharmaceutical companies can operate in distinct business units, a single risk can affect many different parts of the organisation. An integrated approach to risk management not only provides greater insight, but greater efficiency too.
Breaking Down Silos and Automating Risk Management
Implementing a GRC platform that offers best-practice risk management capabilities can help pharmaceutical organisations to establish a consistent risk framework, streamline & consolidate risk management processes, and build a consolidated view of risk. These intuitive solutions enable organisations to set up a comprehensive on-line risk register, where multiple departments can directly log risks. Teams can utilise online risk assessment templates & questionnaires to calculate the likelihood, severity, and impact of risk, and to generate risk ratings. Operational data can be pulled into the solution from other systems & data sources via API connections – enabling teams to set Key Risk Indicators (KRI’s) and define risk tolerances based on real data. This empowers organisations to define a risk appetite framework & operate within it. Once the system is established and the risk register is completed, teams can set controls to monitor risk on an ongoing basis and automated notifications & alerts are sent when the degree of risk reaches an intolerable level. Teams can run instant reports and view live dashboards to get a complete overview of their risk profile and drill down into the detail to address problem areas.
Software engages the entire organisation in the risk management process and ensures all stakeholders across the business can log risks and take ownership of risk. This makes risk management more accessible, accountable, trackable, and resolvable – providing visibility to leadership teams – and the automation saves time and valuable resources. More advanced organisations use risk management platforms to uncover potential opportunities for growth. Instead of simply using the tool to mitigate risk, they use the analytics capabilities to weigh up potential outcomes – enabling them to take a calculated level of risk in pursuit of their strategic objectives.
What’s next for Pharmaceutical & Life Sciences Organisations?
The Covid-19 pandemic certainly shook-up healthcare systems and their suppliers on multiple levels; and exposed weaknesses throughout the pharmaceutical supply chain. But it also demonstrated the industry’s ability to not only adapt but also innovate under difficult conditions – a testament to the engagement and resourcefulness of pharma companies.
Integrated risk management in pharma will only increase in criticality and will become such a fundamental business function that a siloed approach with manual controls & processes will be consigned to the past. The latest risk management technology solutions will provide the pharmaceutical sector with the responsiveness and agility they need to foresee risk and act quickly – setting them up for future success.
Ultimately, the mantra for pharma & Life Sciences companies is to harness their risk management functions to improve patient outcomes. Now has never been a better time to take a more scientific approach to risk. By using a best-practice risk framework packed with data & insights, organisations can create an enterprise-wide view of risk and drive the orchestration of a more integrated approach to risk management – turning risk into opportunity. By embracing technology, pharma companies can maintain an almost surgical level of focus – improving their core risk capabilities and maintaining a strong level of crisis preparedness – enabling them to thrive in a volatile environment – no matter which risks become reality.
To tackle the rapid changes in the pharma industry, and the subsequent risk exposure, the Camms platform enables organisations to get a consolidated view of risk. The increased oversight provided by the dashboards & reports make it easy to understand risk exposure and the automation ensures mitigating actions are implemented. The data analytics available within the platform support risk-based decision making – helping pharmaceutical organisations to become even more focused – as they pave the way for future success.
Find out more about how Camms can help you achieve integrated risk management by requesting a demo of our software today.
Catch up on our other blogs relating to the Pharmaceutical & Life Sciences Sector:
Managing Compliance in the Pharmaceutical & Life Sciences Sector
Effective Project Management in the Pharmaceutical & Life Sciences Sector
Effective Strategic Planning in the Pharmaceutical & Life Sciences Sector