Originally Published on: SpendEdge | Risk Management Strategy for the Pharma Industry – Risk Mitigation | SpendEdge

Why is a Risk Management Strategy Employed?
In recent years, the number of economic, social, financial, political, and legal risks across industries has increased exponentially, and businesses are searching for the optimal risk management strategy. As the necessity of proactively addressing these challenges increases, doing so effectively becomes more difficult and requires more skill, time, effort, and careful planning. Common business risks in the pharmaceutical industry include rising competition, shifting regulations and policies, patent cliffs and expirations, significant crises, political unrest, and fluctuating raw material costs. A risk management strategy enables businesses to approach the risks listed above with caution, preparation, actionable insights, and comprehensive strategies. Organization, coordination, and a proactive approach can significantly mitigate the effects of major risks and mitigate the effects of minor risks. To realize the benefits of a risk management strategy, it must be planned, implemented, and adapted over time to meet the evolving needs, expectations, and objectives of the business.

It is essential for businesses to develop an effective risk management strategy in order to evaluate their procurement process and achieve stellar growth. SpendEdge's team of experts can assist you in developing executable strategies to streamline your supply chain management and achieve procurement excellence.

Risk Management Solutions of the Highest Quality at Your Fingertips

Identification: Every organization and supply chain is susceptible to a variety of dangers. These risks will differ in terms of severity, duration, global impact, and manageability. Companies should collaborate and communicate to identify all potential risks influencing the various departments, components, and systems along the supply chain to ensure an accurate and effective solution. This involves discussing potential risks with stakeholders, team managers, employees, and partners and compiling a comprehensive inventory of those risks for further consideration. Changes in laws and policies, fluctuations in demand or supply, fluctuations in the cost of raw materials, and other external and internal factors must be evaluated by risk management teams to determine their impact on the business.

Once the list is complete, risk management teams must assess and evaluate each potential risk based on its urgency, impact, probability, and priority. Accurately prioritizing these risks according to severity of impact can assist businesses in addressing the appropriate challenges and mitigating future potential problems. This step also aids in allocating the appropriate amount of resources at the appropriate times, thereby reducing the likelihood of significant risks being overlooked and worsening over time. Developing an exhaustive matrix to determine various factors such as likelihood and impact can be extremely beneficial and facilitate team leaders' collaboration throughout the process of developing and implementing a risk management strategy.

Due to the vastness of supply chains and the overwhelming number of risks, it can be extremely difficult to evaluate, address, and mitigate all threats. However, with an efficient risk management strategy, identifying and evaluating the impact of risks is significantly simpler. It may not be possible to mitigate every risk, and in some instances, the primary objective is to minimize impact rather than eliminate it entirely. During this phase, it is essential to address the highest priority risks first, after which the team can progressively address each remaining risk to the best of its ability. If reducing the likelihood of a risk is unlikely, companies must devise a plan of action to implement if an event occurs. In addition to defining roles and responsibilities, this plan should encourage regular oversight.

Monitoring: Once the mitigation plan has been developed and implemented, the next crucial stage is monitoring the plan's effectiveness and the likelihood of the identified risk events occurring. This phase entails collaborating closely with all departments and stakeholders, monitoring all significant metrics, and assessing the efficacy of the implemented risk management strategy. Throughout the risk management process, it is essential to monitor and actively assess and control all relevant factors. During this phase, all department leaders must remain engaged and communicative, and teams must be urged to remain vigilant for any potential incidents. If the implemented risk management strategy was effective, risk management teams can also reevaluate the priority and severity level of a particular issue.

Reporting: Compiling, evaluating, and presenting all relevant data, plans, and approaches implemented through the risk management strategy enables businesses to assess the efficacy of their strategy and make modifications for future iterations as necessary. In addition, it assists in providing stakeholders with pertinent information regarding the business's major risks, actions performed, and the current status of potential or existing risks and their impact. This step also enables the identification and exploitation of significant opportunities for development and long-term change, and provides essential insights into the overall strategy, management, and resolution of all identified challenges.

Identifying, evaluating, and mitigating risks in the pharmaceutical industry has become increasingly difficult due to the increasing number of participants, fluctuating market dynamics, ongoing technological and industrial advancements, and legal changes. A renowned pharmaceutical manufacturer encountered a clustered succession of challenges that were manageable if identified and addressed in advance, and suffered significant supply chain-related losses as a result. In response to increasing market and stakeholder pressure to develop more proactive strategies, the company contacted SpendEdge to develop a comprehensive risk management strategy. Our experts assisted the company in conducting a thorough, accurate, and efficient risk assessment, facilitated the evaluation and identification of risk mitigation approaches, provided a software for efficiently monitoring various risks, and implemented a sustainable reporting system. With a new approach and comprehensive risk management strategy, the pharmaceutical company was able to overcome numerous industry risks, recover from previous obstacles, and create a highly effective proactive system.