For months, life science companies have heard talk about something called the “new normal” triggered by the COVID-19 pandemic. While the term is used frequently, few have made any real attempts to define just what that new normal will be.
The reason for that lack of certainty is that whatever this new normal may come to be, it’s basically a work in progress with more unknowns than certainties—especially when it relates to the business risks faced by life science leaders. As those leaders look ahead to the foreseeable future, what should they be thinking about? What could go wrong? What surprises could pop up and hurt their operations or finances?
Before life science leaders can develop strategies to protect their companies from risks, they need a clearer picture of what’s out there. As someone who has spent a career helping life science companies anticipate and mitigate risks, I’m convinced that there are 10 areas deserving study and planning. Here are the first five.
1. Issues with Outside Companies
From suppliers and vendors, to contract manufacturers and independent sales reps, to joint venture partners and business alliances, today’s life science companies depend on a web of outside companies and the complex supply chains connecting them. These relationships offer efficient ways to tap into expertise and resources a company lacks on its own.
Consider the quest for COVID vaccines. Pfizer and Moderna have become household names, but they couldn’t ramp up development and production on their own. They drew on complex collaborations to advance the process. Had any of those collaborations turned sour, Pfizer and Moderna would probably be months away from distributing vaccines. Reports that actual vaccinations are well below targets reflect supply chain problems, too, because nurses and other medical staff are also part of that web.
You may be well acquainted with the risks your company faces, but how aware are you of the risks threatening the critical players in your supply chains? If they stumble, will you be injured?
2. Management Liability
Company leaders and boards of directors face greater scrutiny than ever at the same time they face more unknowns. Investors and regulators are paying close attention and are quick to take legal action when they disagree with decisions. Every decision you make will be viewed under a microscope, and changes in the regulatory environment will hold you to new standards.
Assuming your directors and officers (D&O) liability coverage will protect you from mistakes is dangerous, as colleague Kevin LaCroix explains in his recent review of D&O issues. The current insurance market is not for the faint of heart: Insurance plays a role in mitigating the risk, and many boards are shocked at increases in premiums for D&O, cyber liability and employment-related coverage. How many of those boards are also aware of the restrictions and exclusions carriers are adding to many of those policies, effectively charging more for less coverage?
3. The Fourth Industrial Revolution
Change may be constant in business, but what some are calling the fourth industrial revolution reflects a quantum leap in the way business gets done. Access to astonishing amounts of data, powerful analytics and technology capable of leveraging both is revolutionizing every aspect of business. But there is also risk in using new technology as it’s developed and tested, which could create unforeseen consequences. Who will be responsible for possible adverse effects? Can we transfer that risk contractually? How do we manage it? How can we analyze the risk when we don’t even know what questions to ask?
4. Employee Mental Health
Anytime, it can be challenging to attract, retain and motivate the right employees. The COVID era has added another challenge: employee mental health.
We’ve seen extensive media coverage of increases in loneliness, depression, anxiety, suicide and substance abuse as people grapple with the emotional fallout from the pandemic. They’re scared, sad and frustrated—and all that can spill over into their job performance and satisfaction with work.
Savvy life science companies are taking the lead in helping their employees manage and improve their health and their healthcare. That pays benefits in two ways: it gets the employees directly involved in decisions about their own health, and it can help to reduce the costs of providing healthcare coverage.
5. Regulators Everywhere
You can’t ignore the myriad levels of regulation you face—as well as the regulations everyone in your supply chain is dealing with. If a contract manufacturer falls out of favor with a regulatory agency in its state, your business may suffer consequences. If you’re relying on suppliers from other countries, you’ll be affected by the attitudes and actions of foreign local competence authorities. The complexities of this regulatory web and the nuances involved create all sorts of risks for your company.
Part 2 Next Week
Stop by the Hylant Blog next week, when we will post Part 2 of this article and share the remaining top risks life science companies face in 2021. To learn how Hylant can help your company better manage risk, visit our Life Sciences site or contact Hylant.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.