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Getting a Handle on Risk

Posted By Administration, Friday, June 20, 2014
Originally posted on 11/22/2013

There’s been a fair amount of talk about dashboards at the 2013 ASAP BioPharma Conference, and here’s another one: a “risk dashboard.” That was just one of the concepts showcased in “Managing Alliance Deal Strategy and Risks: Enhancing and Protecting Value,” presented by Jason Powell, general manager of global alliance management at AbbVie, and Jeffrey Clements, managing director of Palladium Group, Inc.

With other sessions covering issues around arbitration and dispute resolution, Powell and Clements focused on setting up tools and processes early on in an alliance in order to avoid getting to that point and to protect the value of the alliance. AbbVie, the relatively new pharma spinoff of Abbott Labs—“not quite as stodgy as traditional pharma, not quite as on the edge of the cliff as biotech,” in Powell’s words—worked with Palladium, whose sweet spot is corporate strategy and value creation, to avoid a widely cited statistic: for an asset with peak sales of $2 billion, any problem, any delay can mean the loss of $1 million per day.

According to Clements, the barriers to alignment, value creation, and ultimate alliance success include trigger events not anticipated or not responded to, early warning signals of trouble that are “suppressed,” and lack of focus and commitment by senior leadership, as well as folks’ losing sight of the big picture and the strategic context of the alliance.

To avoid these perils in a proactive way, Palladium helped design a framework for AbbVie based on the Balanced Scorecard metric and the W. Edwards Deming model of “plan, do, check, act.” This led to a “Risk Management Loop” examining contingency plans and triggers, complete with the aforementioned risk dashboard, a risk review, and action plans for risk mitigation.

In this process, the strategy and risks for given objectives are identified and put in a visual dashboard. Ideally, there are risk assessments by each partner, then a joint “risk workshop.” Showing the resulting “risk heat map”—with green, yellow, and red areas delineating risks that should be accepted, monitored, or mitigated, Powell admitted that at AbbVie, “We saw everything as high risk; everything was in the red space.” But after talking it over with the partner and gaining alignment, it was found that most risks could reasonably go in the yellow area (medium risk).

But, said Powell, “It’s one thing to identify the risk, it’s another to do something about it.” According to Clements, the risk management dashboard with its red, yellow, and green zones amounts to a set of “guardrails” on either side—the alliance should fall in the middle. As Powell summed it up, “Talk about an incredible contribution to the overall strategy and the asset.”

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