What is the Purpose of a Risk Management Strategy?
The rising number of economical, social, financial, political, and legal risks across industries has risen exponentially over years, and companies find themselves in search of the ideal risk management strategy. As preemptively tackling these challenges becomes increasingly imperative, efficiently doing so becomes more difficult, and requires skill, time, labor, and proper planning. Common risks impacting businesses in the pharma industry include, continuously rising competition, changing regulations and policies, patent cliffs and expirations, major crises, political turmoil, and fluctuating raw material prices. A risk management strategy helps companies approach aforementioned risks with caution, preparation, actionable insights, and comprehensive strategies. Organization, coordination, and a proactive approach can significantly minimize the impact of major risks, and mitigate minor risks. However, to gain the benefits of a risk management strategy, it must be efficiently planned, implemented, and modified over time to meet the changing needs, expectations, and goals of the business.
Creating an efficient risk management strategy is critical for business to evaluate their procurement process and head towards a stellar growth. The team of experts at SpendEdge can enable you to develop actionable plans to streamline your supply chain management and ensure procurement excellence.
What are the Steps to Develop and Implement a Risk Management Strategy?
Identification: Every supply chain and organization is susceptible to a plethora of risks. These risks will be of varying degrees in severity, longevity, overall impact, and ability to address. To ensure an accurate and effective solution, companies should make a collaborative and communicative effort to identify all potential risks affecting the various departments, components, and systems along the supply chain. This includes discussing potential risks with stakeholders, team managers, employees, and partners, and compiling said risks into a comprehensive list for further addressal. Risk management teams must explore changing laws and policies, fluctuations in demand or supply, raw material prices, and other external and internal factors, and determine whether they impact the business.
Assessment: Once the list is ready, risk management teams must assess and evaluate each potential risk for urgency, impact, likelihood, and priority. Accurately prioritizing these risks according to severity of impact can help companies ensure they tackle the right challenges, and minimize further potential issues. This step also helps allocate the accurate volume of resources at required times, reducing the probability of major risks being ignored and worsening over time. Developing a comprehensive matrix to determine various factors such as likelihood and impact can be highly beneficial, and help team leaders collaborate throughout the risk management strategy development and implementation process.
Mitigation: Due to vastness of supply chains, and sheer multitude of risks, it can be highly challenging to evaluate, address, and mitigate all challenges. However, with an efficient risk management strategy, identifying and evaluating the impact of risks is significantly easier. Mitigating every risk may not be possible, and in certain cases, the main target is minimizing impact, as opposed to mitigating it completely. During this step, addressing the high priority risks first is imperative, and then the team can gradually address every listed risk to the best of the organization’s ability. In case reducing the likelihood of a risk is improbable, companies must develop a plan-of-action to utilize if and when an event takes place. This plan should also stipulate roles and responsibilities, and encourage regular oversight.
Monitoring: Once the mitigation plan has been developed and implemented, the next crucial step is monitoring the effectiveness of the plan, the probability of occurrence of the identified risk events. This step includes working closely with all departments and stakeholders, tracking all significant metrics, and evaluating the effectiveness of the implemented risk management strategy. It is important to monitor throughout the risk management process, and take an active role in assessing and controlling all relevant factors. During this step, all department leaders must remain engaged and communicative, and teams must be encouraged to actively look out for any incidents. Risk management teams can also re-evaluate the priority and severity level of a certain issue, if the implemented risk management strategy was effective.
Reporting: Compiling, evaluating, and presenting all the relevant data, plans, and approaches implemented through the risk management strategy helps companies assess the effectiveness of their strategy, and make necessary alterations in future iterations. Additionally, it helps provide stakeholders with relevant information regarding the major risks, steps taken, and current status of potential or current risks and their impact on the business. This step also enables the identification and capitalization of significant opportunities for improvement, long-term changes, and provides crucial insights into the overall approach, management, and resolution of all identified challenges.
Success Story – SpendEdge Advantage
Identifying, evaluating, and mitigating risks in the pharmaceutical industry has become increasingly challenging due to the rising number of players, constantly fluctuating market dynamics, continuous technological and industrial developments, and legal changes. A renowned pharma manufacturer faced a clustered series of challenges that were manageable, if preemptively identified and addressed, and suffered significant losses due to the impact on the supply chain. With rising pressure from the market and stakeholders to develop more proactive strategies, the company approached SpendEdge and sought to develop a comprehensive risk management strategy. Our experts helped the company conduct a detailed, effective, and accurate risk assessment, enabled the evaluation and identification of risk mitigation approaches, provided a software to efficiently monitor various risks, and introduced a sustainable reporting system. With a new approach and robust risk management strategy, the pharma company successfully overcame various industry risks, recovered from previous challenges, and developed a highly efficient proactive system.