IP risk management and geopolitics big concern for life sciences

A new survey by WTW finds that life science firms are now concerned about a much wider range of enterprise risks, with data privacy and climate change coming out on top, and reveals that many companies are struggling to manage intellectual property threats as geopolitics proves the biggest barrier to effective risk management. WTW said the survey of more than 600 risk managers, CEOs and other senior decision makers in the life science industry shows that risk perceptions seem to have shifted. “Whereas once firms might have been focused on core risks, such as product liability, property and D&O, our survey suggests they are now concerned about a much wider range of enterprise risks affecting their ability to do business,” says the broker in a report on the survey’s findings. “This suggests that, as the sector matures, life science companies face the same pain points and headaches as many other sectors outside of the healthcare economy,” adds WTW. The survey of companies from Europe, North America, Asia Pacific and Latin America found that the environment, climate and extreme weather are viewed as the top external risks to business success over the next three to five years, on 44%. Participants were asked to select five risks and rank them in order of severity, which saw cost and availability of inputs, including materials and energy, come a close second on 43%. Next came cyber risk on 40%, changing or increasing regulation on 39%, and social inflation, including the rising cost of litigation, fifth on 36%. When it comes to the biggest internal risks, data privacy and informed consent came top on 46%. Some 44% of respondents are concerned about labelling and packaging issues, 40% named product safety and recall, 39% M&A risks, and talent acquisition completed the top five on 38%. “As the sector becomes more dependent on data to inform strategy and drive innovation, firms are also more conscious not only of the opportunities but also the risks this brings. With the rise of digital healthcare, life science companies are coming under increasing scrutiny from regulators, courts and the public for how they use patient data and how they obtain their consent,” says WTW. The survey, which was conducted in September, also found that half of life science firms polled either had no standardised risk management process in place for intellectual property, or that it did not operate consistently or effectively. “Intellectual property is the lifeblood of most life science businesses. Yet it emerged as the risk area with the lowest standardised approach to risk management in our survey. While larger companies will have sophisticated internal systems for managing these risks, some mid-market firms may struggle to understand and quantify them,” says WTW. It adds that new technologies such as wearables and AI may change companies’ intellectual property risk profiles, and risk management strategies may not have caught up yet. Life science companies may also find it difficult to transfer risks effectively due to a lack of insurance solutions that meet the sector’s specific needs, continues the broker. In addition, the survey found that life science firms are struggling to find adequate insurance protection for climate-related weather risks. “Many businesses appear not to have cover for the business interruption costs of a weather event, while a substantial minority have no cover for extreme weather risks in their supply chain,” explains WTW. Its research shows that although 57% of respondents said they were insured for business interruption following a weather event, just over a third (35%) are only covered for property damage. Some 26% said extreme weather in the supply chain could damage their business but they have no insurance in place to cover this risk. Survey respondents went on to report that geopolitical risk was the biggest challenge to them addressing other risks over the next three to five years. It was seen as a challenge by 53% of participants. “With the conflict in Ukraine and instability in other global regions impacting supply chains, it’s not surprising that political risk tops the list of factors that could get in the way of effective risk management,” says WTW. The research touched on the pandemic and found that Covid-19 left a deep legacy for life science firms but caused fewer losses than expected. Nearly half (45%) of those polled said losses since 2020 were either lower or much lower than expected. Repurposing drugs for new use cases (24%), an increase in automation (23%) and accelerated approval processes (21%) were named among the greatest long-term impacts of the pandemic. “Despite disruption, businesses suffered fewer risk-related losses over this period than they had expected. The pandemic accelerated changes and adaptations, from virtual ways of working and trialling, to the use of AI and machine learning, and speed of processes and regulation, which should bring efficiencies and growth in future years,” says WTW. The company explained that 87% of companies in its survey had an annual revenue above $100m and 13% below that figure. WTW’s life sciences report can do downloaded from www.wtwco.com/en-GB/Insights/2022/12/global-life-sciences-risk-outlook-2023

IP risk management and geopolitics big concern for life sciences

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