Asessing, anticipating and controlling risks
Asessing, anticipating and controlling risks
The Pierre Fabre S.A. Supervisory Board, the Audit Committee, the strategic committee whose members come from the Supervisory Board and the Executive Committee are particularly concerned with planning for, mitigating for and controlling risks.
Every year, the Risks Department draws up a risk map, which it submits to the Executive Committee and the Audit Committee for validation. Each hazard is assessed according to impact and likelihood of occurrence criteria. All the assessments are then consolidated in a criticality matrix.
For the most vital risks, the company creates action plans designed to prevent and mitigate the effects. In addition, insurance contracts are taken out to cover certain operational risks, along with those related to conformity or a sharp fall in exchange rates.
Strategic risks
Strategic risks concern portfolio and innovation risks specific to the pharmaceutical industry.
To build a long-term pipeline of innovative therapeutic active ingredients, Pierre Fabre Laboratories establishes external partnerships for the development of active ingredients, and is strengthening its internal innovation programs in the fields of oncology, dermatology and rare diseases. The teams in charge of external innovation, R&D and business development jointly ensure appropriate due diligence for all scheduled acquisitions and partnerships, along with a holistic integration plan if required.
Operational risks
Operational risks include Supply Chain disruptions, contingencies caused by geopolitical unrest, unavailability of information systems (“cyber” risks) and risks related to product quality or safety.
Supply chain disruptions include shortages and issues affecting the supply chain, industrial risks and the potential of shortcomings in our products’ distribution and logistics chain. They may be caused by regulatory problems, technical difficulties, failure by a supplier to deliver, natural disasters, pandemics or geopolitical unrest. Pierre Fabre prepares for such difficulties; for example through securely sourcing the most strategic raw materials, continuous improvement of production and supply chain processes, and by keeping safety stock and up-to- date business continuity plans for all industrial and logistics sites.
Like all businesses, we operate in a global environment affected by systemic risks such as geopolitical, cyber and health-related threats.
As the technological dimension of our business has grown, cyber risks have become increasingly significant. To protect our information systems, Pierre Fabre Laboratories has set up a cybersecurity plan covering all of the company’s strategic and operational entities.It is supervised by a specialized team and adheres to a specific framework.
In order to guarantee safe, effective products for patients and consumers, Pierre Fabre Laboratories must predict all risks linked to the quality of its products and the information provided to patients, consumers and health- care professionals.
Quality Management System and Vigilance procedures aim to keep such risks to an absolute minimum at every stage of the life-cycle of the product, be it drug or cosmetic. The company also ensures it has sufficient insurance cover for any claims or complaints made against it.
Conformity risks
Conformity risks essentially concern compliance with the regulations applicable to products, the environment, ethics and compliance. Those regulations change constantly and may differ between corners of the world.
The company operates in highly-regulated environments and may be subject to penalties if it falls short of set requirements. Failure to comply could also damage its reputation.
To plan for those risks, Risk Management, Ethics and Compliance, Quality and Internal Control functions work together within the same department. They are governed by several multidisciplinary bodies.
The main ones include the Quality Committee, the Ethics and Compliance Committee and the new CSRD Committee* (established in response to the new European ESG** regulations).
CSRD* : Corporate Sustainability Reporting Directive
ESG** : Environmental, Social and Governance.
Climate and environmental risks
Linked to climate change and biodiversity loss, these risks can threaten the company’s longevity.
Pierre Fabre includes climate risks in its strategic planning in order to mini- mize their negative impacts and seize opportunities linked to the transition to a more sustainable economic model.
In this respect, Pierre Fabre Laboratories has pledged to reduce its environmental footprint in line with the + 2°C pathway of the Paris Agreement (2015).
In addition, the company has established measures to drastically reducing energy and water consumption at its industrial and tertiary sites.
By way of example, a dry factory concept is being rolled out at the industrial site in Soual, in the French department of the Tarn, which is highly exposed to the risk of water stress.<
Financial risks
Financial risks include inflation, leading to an increase in the cost of raw materials and energy, and hazards related to the exchange rate, tax increases and cash flow.
Our company operates in growing markets. However, its profitability can be affected by factors such as cost inflation, exchange rates and sudden tax increases. The past year was no exception, but the company managed to preserve a healthy financial position, to pursue its long-term investments.
Because of its international presence, Pierre Fabre Laboratories is exposed to the permanent risk of currency fluctuations. Thus the company has set up a currency hedging policy with its specialized partners.
Lastly, given the company’s low level of debt and healthy financial position, the cash flow risk — which affects a business’s ability to pay its debts — is under control.
