Risk and Risk Management

As we have stated in previous reports, the Group, like every business, faces risks and uncertainties in both its day-to-day operations and through events relating to the achievement of its long term strategic objectives. The Board has ultimate responsibility for risk management within the Group and there is an ongoing and embedded process of assessing, monitoring, managing and reporting on significant risks faced by the separate business units and by the Group as a whole. More detail in relation to this process can be found within the Corporate Governance section.

The table below highlights the main potential risks to the Group strategy, as identified by the Board, and the controls put in place in order to mitigate the said risks:

Strategic ElementRiskPotential ImpactHow we mitigate the risk
Commercialise SmallShareholder Return SmallCompetitor product launched against one of our leading brands
  • Loss of market share and revenue
  • Increased marketing activity and expenditure
  • Revenues and margins may be materially adversely affected upon the expiry or early loss of patents, or by generic entrants into the market for the applicable product
  • Product improvement plans and marketing strategies are reviewed on a regular basis
  • Where competitor products are launched a response strategy is established and followed by our marketing team to highlight any unique selling points or competitive advantages or to position our products defensively to minimise competitor impact
  • Market research is conducted in order to allow the marketing team to better understand customer needs and ensure that our products fulfil the identified requirements
  • Any product patents are monitored and consideration given to the formulation of a defensive strategy towards the end of the life of the patent
Commercialise SmallShareholder Return SmallRevenue from recently launched new products failing to meet expectations
  • Reduced revenue and profitability which may mean we are unable to recoup the costs incurred in developing and launching the product
  • Impairment of intangible assets
  • In respect of all new product launches a detailed marketing plan is established. Progress against the plan is constantly monitored
  • The Group ensures that it has detailed market knowledge and retains close contact with customers through its sales teams which are consistently trained to a high standard
  • Alongside the marketing plan the sales team receives training on the product, its benefits and all available technical information
Commercialise SmallShareholder Return SmallFailure of clinical trials
  • A succession of clinical trial failures could adversely affect our ability to deliver Shareholder expectations
  • Development costs have been incurred but are effectively wasted
  • Our reputation and relationship with veterinarians could be damaged
  • Our positioning in the market may be affected and could reduce our leading position in key therapeutic areas
  • Before major costly efficacy studies are initiated, smaller proof of concept studies are conducted to study the effects of the drug on target species and for the target indication
  • Regular review of pipeline by a cross functional project team
Commercialise SmallShareholder Return SmallPrescribing pressure on veterinarians to reduce antibiotic use
  • Impact our antimicrobial product range and reduce sales
  • Our reputation could be adversely impacted if we do not respond appropriately to government pressure
  • Regular contact is made with all relevant veterinary authorities to ensure that we have a comprehensive understanding of anticipated regulatory changes
  • Development of new products that minimise antimicrobial resistance concerns
Shareholder Return SmallManufacture SmallThe failure of a major supplier
  • This may lead to significant delays and/or difficulties in obtaining goods and services on commercially acceptable terms
  • The subsequent delay in manufacturing and sales may result in product shortages and significant delays, which may lead to lost sales
  • Where it becomes evident that issues in relation to manufacturing/supply may arise alternative suppliers are identified and detailed plans drafted. Where a manufacturing transfer is required stock is built up in order to avoid/mitigate an out of stock situation
  • In respect of manufacturing, a "second sourcing" project for key materials has been established and maintained
  • The business units monitor the financial status of key customers and maintain regular contact with them (including face to face meetings)
  • All contracts with suppliers are reviewed from both a commercial and legal perspective to ensure that assignment of the contract is allowed should there be a change of control of either of the contracting parties
Innovate SmallManufacture SmallCommercialise SmallShareholder Return SmallFailure to meet regulatory requirements under which we operate
  • Delays in regulatory reviews and approvals could impact the timing of a product launch
  • Significant delays to anticipated launch dates of new products could have a material adverse effect on our margins
  • Any changes made to the manufacturing, distribution, marketing and safety surveillance processes of our products may require additional regulatory approvals, resulting in additional costs and/or disruption to these processes
  • Failure to achieve regulatory requirements may result in operational closures which in turn increases expenditure and delays production
  • The Group always strives to exceed regulatory requirements and ensures that its employees have detailed experience and knowledge of the regulations
  • All businesses have clearly established quality systems and procedures in place
  • Regular contact is maintained with all relevant regulatory bodies in order to build/strengthen relationships and ensure good communication lines
  • The regulatory and legal teams remain constantly updated in respect of proposed/actual changes in order to ensure that the business is equipped to deal with and adhere to such changes
  • Where any changes are identified which could affect our ability to continue to market and sell any of our products a response team is created in order to mitigate such risk and to retain effective communication with the relevant regulators
  • External consultants are utilised to audit our manufacturing systems prior to any major inspection
Innovate SmallManufacture SmallCommercialise SmallShareholder Return SmallLoss of key personnel
  • Loss of knowledge, skills and experience
  • Inability to attract key personnel may weaken succession planning
  • New Executives/Senior Managers are provided with a detailed induction to the business
  • Succession planning is given consideration by the Board and, where deemed necessary, Key Man Insurance is in place
  • Implementation of a Performance and Development Review Process is in progress
  • Remuneration packages are reviewed on an annual basis in order to ensure that the Company can continue to retain, incentivise and motivate its employees