The ten key steps to manage and mitigate risk within life science companies

The ten key steps to manage and mitigate risk within life science companies

By: Erin O’Brien

Managing and mitigating risks with a structured plan is essential for life sciences companies due to the complex and challenging nature of their operations. A structured risk management plan helps identify potential hazards and uncertainties early in the process, allowing companies to assess and prioritize risks based on their potential impact on patient safety, regulatory compliance, and business continuity. 

Life sciences companies can minimize the likelihood of adverse events during clinical trials, product development, manufacturing, and distribution by implementing systematic risk assessment methodologies and proactive risk mitigation strategies, such as those outlined below. This approach enhances the reliability and safety of their products and strengthens their reputation within the industry and among regulatory authorities. Moreover, a structured risk management plan supports informed decision-making, resource allocation, and continuous improvement, ensuring sustainable growth and resilience in a dynamic and highly regulated environment.

Key Steps to Evaluate Risk:

1. Identify Pro Items: Begin by listing all problems, risks, and opportunities (Pro Items) currently affecting or could affect your organization. This step ensures clarity on what needs attention.
2. Assess Value: Determine which Pro Items are most valuable if not pursued. This helps prioritize based on potential losses or missed opportunities, emphasizing the impact of each item.
3. Evaluate Impact: Measure how effectively each Pro Item, if pursued, can create or protect value for the organization. This involves estimating the financial and strategic impact of addressing each item.
4. Risk Mitigation Planning: Develop a risk mitigation plan for high-priority risks. This involves allocating resources to minimize the likelihood and impact of identified risks, such as through additional investments, process improvements, or strategic adjustments.
5. Use Narrative-Based Analytics: Utilize narrative-based tools and processes to overcome cognitive biases and ensure comprehensive risk assessment. This approach helps in understanding and communicating the potential consequences of each risk.
6. Quantify Financial Impact: Calculate each risk’s financial implications using tools like probabilistic analysis. This step involves estimating the expected Net Present Value (NPV) of risks and potential returns on investment in mitigation strategies.
7. Prioritize Based on ROI: Rank Pro Items based on their productivity investment ratio, which compares the cost of mitigation against the potential value protected or created. This prioritization ensures resources are allocated to initiatives that offer the highest return on investment.
8. Decision Making: Use decision-making frameworks to determine which Pro Items to pursue at a given time. This involves considering the productivity curve and balancing financial returns with strategic objectives.
9. Integrate into Planning and Budgeting: Incorporate risk evaluation into strategic planning and budgeting processes. This ensures that risk management considerations are aligned with organizational goals and resource allocations.
10. Continuous Monitoring and Adjustment: Regularly review and adjust risk management strategies based on changing conditions and new information. This iterative process helps maintain resilience and adaptability in the face of evolving risks.

These steps provide a structured approach to evaluate and manage risks effectively within an organization, ensuring that decision-making is informed by comprehensive analysis and aligned with strategic priorities. 

Hiring a consultant for risk management in this context could be highly beneficial due to the complexity and strategic importance of effectively managing risks, opportunities, and problems within the organization. Companies face several key challenges, including ad hoc decision-making, cognitive biases towards problem-solving over risk management, and the need for systematic frameworks to prioritize resource allocation. The right consultant brings valuable expertise in developing structured approaches, such as probabilistic analysis and sensitivity testing, to accurately assess and mitigate risks. Moreover, consultants can introduce best practices from diverse industries, ensuring a comprehensive and unbiased evaluation of risks, opportunities, and strategic investments. Their external perspective can also help align organizational priorities with industry standards and regulatory requirements, enhancing decision-making processes and optimizing resource allocation for maximum enterprise value protection and creation.

This information is based on a webinar presented by Windshire Consulting. The entire webinar can be found on our website here. Please reach out to us at info@windshire.com if we can be of any assistance.

Download the PDF version of this article here: Lab Developed Tests – Are you ready?