Strategic Risks Mitigation

Value Generation from Acquisitions 

Acquisitive growth remains a core element of the Group’s strategy. A failure to execute and properly integrate acquisitions may impact the Group’s projected revenue growth, its ability to capitalise on the synergies they bring and/or the development and retention of the associated talent pool.

All potential acquisitions are assessed and evaluated to ensure the Group’s defined strategic and financial criteria are met. A discrete integration process and post integration review is developed for each acquisition. This process is supported by experienced management with a view to achieving identified benefits, cultivating talent and minimising general and specific integration risks.

 

Progress: No change

 

Innovation and Insight

 

The continued success of the Group has been dependent upon the development and delivery of innovative solutions to our clients. Examples include serialised packaging, omnichannel contract sales and contact centre solutions.
An inability to predict client and market trends, and develop and deliver such innovation would be a risk to our market leading positions in the various sectors in which we operate.

Innovation and insight is central to the business and acquisition strategies set down by the Senior Executive
Team. At a divisional level, each management team has a responsibility to monitor market changes and identify
current and projected client and market demands for new service offerings. The divisions have designated
roles within their business units tasked to deliver on these responsibilities.

 

Progress: No change

Client Diversification

As the Group’s activities consolidate and further acquisitions are completed, the Group’s client base may become more concentrated, making the Group more susceptible to competitive, client merger or procurement led threats.

In individual business units where there is a high dependence on a small number of key clients, the threats and opportunities are reviewed by divisional management at each business review. The impact that any potential acquisition may have on client concentration is considered as part of the acquisition assessment process.

 

Progress: No change

 

 

Client Outsourcing Strategy

The Group’s activities may be impacted by changes to pharma company outsourcing strategy, such as pharma companies reducing their roster of preferred vendors, or the wholesale outsourcing to holding companies that meet all of their service requirements.

In order to maintain or develop a preferred vendor relationship with our target clients, acquisitions can be used to fill any key gaps in client coverage or service offering. The key is to maintain strong client relationships and to keep abreast of potential changes in their business strategies. We have developed an agile Business Development strategy to maximise UDG Healthcare's value to our clients.

 

Progress: No change

Talent Management

 

The success of the Group is built upon effective management teams that consistently deliver superior performance. If the Group cannot attract, retain and develop suitably qualified, experienced and motivated employees, this could have an impact on business performance.

Talent requirements of the Group are monitored to ensure businesses meet prevailing and anticipated requirements in term of skills, competencies and performance. There is a strong focus on key talent management practices, including leadership and management development, succession planning and performance management. A formal talent review process is implemented globally and local talent reviews are conducted and linked to the global process.

 

Progress: No change 

Economical, Political, Legislative, Regulatory and Tax Risk

 

The global macroeconomic, political, regulatory, legislative and taxation environment may have a detrimental impact on our client base, the markets in which they operate, the services we can offer them and our operations in those markets. Such detrimental impacts could result from Brexit, for example. Additional impacts could arise from potential legislative changes following the U.S. election result, or trade tensions, which remain elevated in many parts of the world.

The Group continues to review its portfolio of investments through the annual strategic review process and through constant challenge at a Senior Executive Team and Board level. Acquisitions and new service offerings are sought which improve the balance of our investments and give greater exposure to innovative and growing market segments. While the likelihood and immediacy of a ‘hard’ Brexit is increasing, our reduced U.K. exposures and other steps taken by the Group significantly mitigate the potential impact of Brexit to the Group as a whole. 

 

Progress: Increased risk

Heightened likelihood of near-term political change, then secondary effects.

Operational risk  

Pandemic risk

 

The Covid-19 outbreak is an unprecedented global event whose impacts and duration are not yet fully known. While the Group now more clearly understands the impacts of the pandemic (pages 12 and 13), we expect Covid-19 to continue to affect our operations and performance, and to result in further uncertainty for the Group, its clients and the wider global economy.

The diversified nature of the Group’s businesses, our robust balance sheet, and the market fundamentals that underpin our businesses inherently provide mitigation to the Group from Pandemic risk. Our Group business continuity plans have provided an additional layer of mitigation through the Covid-19 crisis. Additionally, the Group continues to monitor and assess the potential and realised impacts of Covid-19.

 

Progress: No change

Patient Risk

 

Medicines and medical devices can be packaged, supplied or administered directly to patients by certain Group businesses. The risk of inappropriate advice, packaging, supply or administration could lead to a negative patient experience.

The level of automation within the Group’s packaging facilities continues to increase. The serialisation of packaging processes continues and in addition, the utilisation of electronic batch records improves assurance and reduces the risk of human error in packaging. The embedding of validated software in our patient support programs continues with our Health Cloud CRM and the utilisation of an electronic quality management system. Administration of medicines to patients or providing patient support is covered by a detailed client contract with the Marketing Authorisation Holder (MAH), fully approved scripts, and a divisional clinical governance framework.

 

Progress: No change

 

Regulatory compliance

 

The Group has many legal and regulatory obligations, including in respect of: (a) protection of patient information (such as HIPAA and GDPR); and (b) patient and employee health and safety. In addition, many of the Group’s activities are subject to stringent licensing regulations, for example, FDA, EMEA and national agency manufacturing, packaging and promotional regulations and the serialisation requirements under the Falsified Medicines Directive (FMD). A failure to meet any of these could result in regulatory restrictions, financial penalties, the inability to operate, or products and services being defective, harming patients and potentially giving rise to very significant liability.

Maintenance of legal, regulatory and quality standards is a core value of the Group. The Sharp Division is
subjected to routine FDA, EMEA and national agency inspections and so is required to be ‘audit ready’ at all
times. Patient education and information programmes are reviewed to ensure compliance with regulation and codes of practice and are subject to regular assessment by the Quality and Risk & Compliance teams. Data protection training, gap analyses and auditing continues across our global locations with a focus on the Group’s requirements and local personal data protection compliance.

 

Progress: No change

 

IT Systems Risk

 

The ability of the Group to support operations and provide its services effectively and competitively is dependent on technology and information systems that are appropriately integrated and that meet current and anticipated future business, regulatory and security requirements.

The Group’s technology and information systems and infrastructure are the subject of an ongoing programme to ensure that they are capable of meeting the Group’s strategic intent and future requirements. Enhanced governance procedures are in place to ensure alignment with the strategic direction of the Group.

Progress: No change

 

Contract Risk

 

The underlying terms of the Group’s commercial relationships drive the profitability of the Group. The nature of the Group’s business means that the Group could be exposed to undue cost or liability if it agrees onerous terms with its clients or suppliers.

The Group has adopted processes for identifying and mitigating against undue risks in all prospective commercial relationships, supported by personnel with expertise and/or experience in key commercial risk areas.

 

Progress: No change

 

Cyber Security

 

The global threat is increasing due to the activities of criminal organisations and nation states targeting valuable business and personal information through increasingly sophisticated means. These advanced and persistent threats are targeted at business-critical data using, for example, phishing attempts, impersonation, and ransomware for financial and other gain.

The Group has implemented multi-layered information security defences to identify vulnerabilities and protect against attacks. To meet the increasing cyber threat, our systems, procedures and resources are continuously being reviewed and enhanced to detect and respond effectively to cyber events. Cyber simulation software has been sourced and implemented to ensure continuous user awareness.

 

Progress: No change

Business continuity



The Group is exposed to risks that, should they arise, may lead to the interruption of critical business processes that could adversely impact the Group or its clients. Covid-19 has resulted in such interruptions with varying impacts across Group businesses.

Group business continuity plans have been activated to varying degrees based upon the Covid-19 impacts on individual businesses. Our Covid-19 business continuity responses have included enhanced health and safety measures, the use of technology to enable remote working across much of the organisation and the virtual delivery of services to clients, as well as cost control measures.

 

Progress: Reduced risk

Business continuity processes have demonstrated resilience through the Covid-19 crisis.

Financial risks  

Financial Controls

 

The Group’s resources and finances must be managed in accordance with rigorous standards and stringent controls. A failure to meet those standards or implement appropriate controls may result in the Group’s resources being improperly utilised or its financial statements being inaccurate or misleading.

The financial controls of the Group, as well as their effectiveness, are monitored by the Board in the context of the standards to which the Group is subject and the expectations of its stakeholders. This monitoring is supported by a dedicated internal audit function. The Group’s financial function, systems and controls are also subject to periodic review to ensure that they remain robust and fit for purpose.

 

Progress: No Change

Liquidity, Interest Rates and Credit

 

The Group is exposed to liquidity, interest rate and credit risks.

The management of the Group’s financial risks is governed by policies reviewed and approved by the Board. These policies primarily cover liquidity risk, interest rate risk, currency risk and credit risk. The primary objective of the Group’s policies is to minimise financial risk at a reasonable cost. The Group does not trade in financial instruments.

 

Progress: No Change

Foreign Exchange

 

The Group’s reporting currency is the U.S. dollar. Given the nature of the Group’s businesses, exposure arises in the normal course of business to other currencies, principally sterling and euro.

The majority of the Group’s activities are conducted in the local currency of the country of operation. As a consequence, the primary foreign exchange risk arises from the fluctuating value of the Group’s net investment in different currencies. Our strategic intent is to proportionally grow the U.S. as a source of earnings at a faster rate than other markets, which will reduce the Group’s foreign exchange risk.

 

Progress: Increased risk

Increased potential FX volatility with U.S. elections and Brexit.