KPMG warns pharma firms of poor risk mgmt

Consultancy firm KPMG has warned the Indian drug industry against poor risk management in a changed business environment.

The pharma consulting group stated that though the industry has historically produced consistently superior financial results, it has experienced series of unfortunate events over the recent years resulting in increasing regulation, legislation and litigation.

Unless the industry responds to these changes, it may result in a disaster, the agency alerts.

KPMG has commissioned a research programme jointly with Sloan School of Management of Massachusetts Institute of Technology to gain insights into the changing nature of risk and control in the pharmaceutical industry.

"Indian drug industry, which is now emerging as an active player in the world generic market space and also in intellectual skillS, should be well prepared to face the challenges emerged in this changed environment," says Richard Sharman, partner-Risk Advisory Services, KPMG UK.

Sharman, during his recent visit to Mumbai to address an executive briefing session on risk management for pharma companies said, that implementation of new practices around risk management will move toward mitigating extreme negative events impacting the industry while providing a competitive advantage in anticipating the next big risk.

"Though many internally generated risks are unique to individual companies, the risks results from external mandates would increase the risk profile exponentially," he cautioned.

KPMG, through the study, has identified about 125 key risks throughout the product lifecycle that can impact financial performance in the industry.

Many of these risks were relevant to Indian industry, which suffered badly during the last one year in terms of overall business, profitability.

Drug recalls, delisting of certain drugs from WHO qualification list, setbacks in the export front and pre-mature termination research projects were few of the impacts of poor assessment of risks.

"As the pace of business accelerates, the impact of global competition, new technology, changing regulation and consumer pressures is presenting senior executives of major organisations with a constant stream of challenges. They need to be able to rapidly identify and respond to these challenges in a way that allow them to exploit opportunities and manage risks on a global basis," Sharman added.