The biggest risk in the pharmaceutical and bio sector was ‘disruption to sales activities and the supply system.’ The results were the same in 2016 and six years later in 2022. However, while there were concerns in the past about the risk of ‘market recession’ and ‘loss of brand value’, recently the importance of cyber risk and risk management regulatory/legal emerging.
According to the Korea Health Industry Development Institute’s ‘Risk Management of Pharmaceutical and Biotechnology Companies’ research report on the 14th (Kim Eun-young, senior researcher at the Health Industry Policy Research Center), the No. 1 risk importance in the biopharmaceutical industry in 2022 was ‘disruption to sales activities and supply system’. This was followed in the following order: private crime, energy crisis, legislative and regulatory changes, and macroeconomic changes. This is different from the past, when there was great concern about stagnation in the market and shrinkage and loss of brand value.
Researcher Kim Eun-young said, “Although it is difficult to predict risks in the biopharmaceutical industry, it is an area where the social impact of risks is significant. This is because it is closely related to people’s daily lives and is an important area of interest in terms of national industrial competitiveness,” adding, “Unexpected events “It is important to pay attention to restoring the situation to its original state when responding to accidents,” he said.
Risks that pharmaceutical and bio companies must carefully manage include ‘business risk’, ‘research and development risk’, ‘supply chain risk’, ‘quality risk’, and ‘patent technology leakage’. Researcher Kim analyzed that the key management risks of domestic pharmaceutical and bio companies vary from company to company, and are managed by dividing them into financial and non-financial or external and internal. External risks are divided into risks such as environmental disasters and catastrophes, and internal risks are subdivided into risks such as business operations, finance, laws and strategies.
Some companies divide risks into the areas of research and development, management and legal issues, production/sales/marketing, and climate change, while others distribute risks into research and development, management, sales and production depending on the areas that occur according to the product cycle. Due to the recent impact of ESG management, climate and environment, partner management, and supply chain management have also been presented as major risk areas.
Looking at the risk management style of domestic pharmaceutical and bio companies, it was found that many companies hold the relevant duties at the same time. Decisions related to risk management are made at C level, but there are few companies where a Chief Risk Officer (CRO) manages risks. It was found that key management risks are monitored and supported by the company’s risk management control tower, while risks inherent in daily work are proactively managed by the responsible department.
Accordingly, Researcher Kim said, “Corporate risk management has great potential to create value as it is linked to achieving goals,” and added, “Risk management should be included in the management plan and managed in relation to the company’s strategy or goals.” He added, “There is a need to change perception where senior managers also recognize the importance of risk management, recognize it as a management task, and establish it as part of corporate management.”
In fact, Johnson & Johnson (J&J), a global pharmaceutical company, explained that it discloses its company-wide risk management system through disclosure data and risk management framework reports every year. Information about risk management is disclosed in detail in the report, and executives are actively involved in risk management. The Agency said, “Compared to domestic companies, Johnson & Johnson’s risk management stands out in the specificity of information disclosure and shareholder engagement activities for risk management.”
Researcher Kim said, “Domestic biopharmaceutical companies must establish a system so that risk management activities can be linked between departments and linked to the daily work system, and establish a dedicated department to supervise the work and use professional personnel to ensure risk management practical. ” “We need to reorganize the organization so we can do that,” he suggested.
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