ENTERPRISE RISK MANAGEMENT IN PHARMACEUTICAL COMPANY.

ENTERPRISE RISK MANAGEMENT IN PHARMACEUTICAL COMPANY (A CASE STUDY OF FIDSON HEALTHCARE LIMITED.)

ABSTRACT

Risk is at the center of life itself. How pharmaceutical companies successfully implements an Enterprise Risk Management (ERM) programme, to identify and manage potential risks, can mean the difference between financial freedom and financial despair. As a practical option for managing risk, it is associated with a number of factors that hamper its smooth flow. These difficulties manifest when companies lack knowledge of ERM Frameworks; still using the traditional ways of risk management. The problems become more compounded when the adopted ERM frameworks would not fully be utilized; as in the case with pharmaceutical companies in Nigeria. The researcher then quickening to use this piece of study,  to evaluate the use of ERM in pharmaceutical companies, with its associated prospects, challenges and problems. The researcher sourced data from the primary and secondary sources of data for this work, using works by other authors and information from the oral interview carried out on the respondent. Despite the new accreditation guidelines and a provincial strategy for managing risk, adherence to effective risk management remains suboptimal in our pharmaceutical companies and in many industries. It was discovered that although ERM is being implemented in Nigerian pharmaceutical industry, the level of implementation is either very low or cannot be easily ascertained. Also, it was further discovered, that there exist an insignificant but positive relationship between ERM and total assets and liabilities as proxies for firm size and leverage. The researcher made recommendation from the findings of this works that there is need to encourage and adopt the full use of ERM frameworks in industries and there is need for more explicit measures in identifying firms that engage in ERM and those that do not.    

TABLE OF CONTENTS

TITLE                                                                                PAGE                                                                                                        

Inside Title Page                                                               ii

Approval Page                                                  iii

Dedication                                               iv

Acknowledgement                                                            v

Abstract                                                                           vi

Table of Content                                                              vii

CHAPTER ONE: INTRODUCTION

1.1      Background of the study                                          1

1.2      Statement of the Problems                                       4

1.3      Objectives of the Study                                            5

1.4      Relevant Research Questions                                  6

1.5      Scope and Limitations of the Study                         6

1.6      Significance of the Study                                         7

1.7      Definition of Terms                                                  7

CHAPTER TWO: LITERATURE REVIEW

2.0       Introduction                                                         10

2.1        Concept of Risk                                                  10

2.2        Objectives and Principles of Risk Management   13

2.3        Historical Context of ERM                                  16

2.4       The ERM Frameworks of Pharmaceutical            18

Companies

2.5        Risks in Pharmaceutical Companies                  23

2.6       The ERM process for Pharmaceutical Companies        27

2.7       Risk and Economic Capital Models                     30

2.8       Risk Tolerance in Pharmaceutical Companies     31

2.9       Main Risk and Regulatory Requirements             33

2.10    Problems and Challenges in Pharmaceutical                37

Companies    

2.11    How Pharmaceutical Companies manage these    39

Main Risks

CHAPTER THREE: RESEARCH METHODOLOGY

3.0    Introduction                                                            42

3.1    Research Design                                                     42

3.2    Population of the Study                                          43

3.3    Sources of Data                                                      43

3.3.1 Primary Data                                                           44

3.3.2 Secondary Data                                                      44

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS   

4.0    An Overview                                                            45

4.1    Introduction                                                            45

4.2   Analysis                                                                   46

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

5.0   Introduction                                                             60

5.1   Summary of Findings                                              60

5.2   Conclusion                                                              63

5.3    Recommendation                                                    65

5.4    Suggestions for Further Studies                             66

REFERENCES                                                         68

APPENDICES                                                           73                   

CHAPTER ONE

INTRODUCTION

1.1             BACKGROUND OF THE STUDY

In the business world, every individual and businesses are exposed to risk. For any business to exist and survive, the business has to go through some challenges of risk. Risks are in existence simply because entities, companies and organizations have ‘assets’ of a material or immaterial nature that could be subject to physical harm that has consequences on the known entity (Andy Osborne 2012- Risk Management made easy).

In Risk management, there is no formal definition of. Risk has been defined by different scholars based on their level of understanding. One of such definition of risk is “Risk implies exposure to uncertainty or threat (Kannan and Thangavard, 2008) and “a decision to do nothing to explicitly avoid the opportunities that exists and leaving threats unmanaged.”(Webster, 2007). Also, Risk can be defined as the combination of the probability of an event and its consequences (ISO/IEC Guide 73).

Risk management therefore, is a proactive approach to reduce threats, increase opportunities, and optimize achievements of objectives (Pearce and Robinson, 2000, Webster, 2004,’ Gray and Larson, 2006.’Rejda, 2001).  Also, Andy Osborne 2012 says risk management is a structured and coherent approach to identify, analyze and manage risks that affects the strategy, process, people and technologies.

“Prior the emergence of ERM, organizations used to handle their risk individually and independently, using the traditional ways of risk managements of”:

·        Identification

·        Evaluation

·        Control

As time goes on, companies now realized that it would favour them more to treat their risks as a whole (portfolio), as would surely reduce its costs and expenditure incurred in managing risk. And that was how ERM came into existence in 2004 Olaf Passenheim, 2011).

ERM is a holistic way of treating risk in an or