Authored by Baker Tilly's Darren R. Jones, Mark Scallon, John A. Rogula, and Corey Parker
CHICAGO, IL / ACCESS Newswire / February 5, 2025 / Life sciences companies navigate a complex industry where innovation and patient care intersect with strict regulations and financial challenges. To succeed, organizations must proactively identify, manage and mitigate risks across all facets of their operations, from research and development to commercialization. Establishing robust risk governance mechanisms not only protects value but also enables life sciences companies to focus on delivering life-changing innovations to patients.
Addressing risks with a comprehensive framework
The dynamic nature of the life sciences industry requires a tailored enterprise risk management (ERM) framework. This framework must address the unique challenges life sciences organizations face, including regulatory hurdles, adapting to shifting market dynamics and operational complexities. By proactively identifying and addressing these risks, organizations can better navigate evolving threats and seize growth opportunities.
Financial: Examples of financial risks include cover reporting, compliance and transactional challenges. Maintaining robust internal controls and adapting to Sarbanes-Oxley Act (SOX) compliance are essential. Effective oversight of chargebacks and rebates, transparency in financial operations and accurate reporting are critical components of financial risk management.
Operational: Operational risks arise from flawed or inefficient processes. For the life sciences industry, this includes ensuring mature and scalable quality programs, managing contract development and manufacturing organization (CDMO) dynamics and streamlining interactions with healthcare providers (HCPs), research institutions and other stakeholders to ensure seamless operations.
Regulatory: Adhering to legal and regulatory requirements is a fundamental aspect of risk management for any life sciences organization. This includes implementing controls to oversee HCP engagements and third-party relationships while ensuring compliance with disclosure and transparency mandates. Additionally, organizations must prioritize quality management, pharmacovigilance and global market access to maintain product integrity and navigate complex regulatory landscapes across regions.
External: Third-party collaborations introduce unique risks that require careful oversight. This involves evaluating vendor capabilities, ensuring compliance and balancing operational efficiency with risk mitigation in outsourced research (CROs), outsourced manufacturing, co-licensing agreements and distribution arrangements. Proper due diligence and continuous monitoring are essential to maintaining quality, regulatory adherence and business continuity.
Strategic: Strategic risks influence decision-making processes critical to the company's direction. Key considerations include optimizing customer engagement, strategy implementation and balancing product pipeline priorities with trial designs and evidence generation. Additionally, addressing workforce challenges such as hiring, retention and cultivating a cohesive culture is vital. Establishing governance structure aligned with the organization's stage of development is fundamental to long-term success.
Technology: The life sciences industry increasingly relies on data throughout especially throughout drug discovery, clinical development and commercialization. As organizations navigate this data-heavy landscape, technology risks become more critical. Companies must enhance IT capabilities to support compliance, quality and regulatory processes, while protecting sensitive data with robust security and privacy measures. In markets like rare disease and specialty pharmaceuticals, ineffective use of technology and data can result in significant opportunity costs. Optimizing technology to align with focused marketing and sales efforts is essential for successful commercialization and mitigating risks.
Managing risk across the organizational lifecycle
The risk landscape for life sciences companies evolves as they grow from research-focused startups to global commercial entities. Proactive risk management at each stage of the lifecycle ensures sustained growth and compliance.
Discovery: During preclinical and early clinical trials, organizations focus on demonstrating viability while navigating anti-kickback regulations, patient identification challenges and securing evidence to support studies.
Development: As companies advance, establishing strong relationships with contract research organizations and key opinion leaders (KOLs) becomes essential. Preparing for commercialization requires developing robust governance structures.
Commercialization: Post-launch, companies must scale operations while maintaining compliance. Key priorities include enhancing safety protocols and addressing risks related to market access, HCP engagement, transparency reporting and fair market value (FMV) considerations.
Scalable solutions for growth
To navigate the complexities of risk management effectively, life sciences companies must adopt scalable solutions that adapt to their growth journey This involves:
Early risk identification: Anticipating challenges during the discovery and development phases.
Governance evolution: Establishing a culture of compliance and accountability that grows with the organization.
Strategic partnerships: Leveraging relationships with vendors, CROs and KOLs to drive innovation while mitigating risks.
Comprehensive ERM solutions for life sciences
Navigating the complexities of risk management requires a strategic approach tailored to the unique challenges of the life sciences industry. With inherent industry risks and substantial nuance to strategic execution as the industry innovates new go-to-market models, building a strategic ERM program to proactively identify, categorize and prioritize risks and opportunities across the enterprise requires significant time and resources, especially without specialized experience.
Baker Tilly brings deep industry knowledge and experience in implementing ERM solutions, helping clients effectively identify, prioritize and mitigate risks while uncovering opportunities. Our objective and tailored approach, grounded in leading practices, enables organizations to connect seemingly unrelated risks and opportunities across strategy, finance, operations, technology and compliance. As a result, our clients are better positioned to minimize potential losses, create stakeholder value, maintain financial stability, and foster innovation.
Contact Baker Tilly to learn more
For more information on this topic or to learn more about enterprise risk management solutions for life sciences companies, contact a Baker Tilly specialist.
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