Article
Enterprise risk management for life sciences companies: Navigating challenges across the organizational life cycle
Jan. 31, 2025 · Authored by Darren R. Jones, Mark Scallon, John A. Rogula, Corey Parker
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.
