An Evaluation and Analysis of Risk Management: UK Pharmacy Industry - Essay Example

An evaluation and analysis of risk management: UK pharmacy industry Background: The pharmaceutical industry in UK is a victory. In recent years due to financial crisis in this industry also have some effect budgeting problems. Exchange rate risk merely the risk, which the investors are bare. A change in the exchange rate will effect the investment they made. In this paper describes an evaluation and analysis of the risk management of UK Pharmacy industry and investigate impact of exchange rate risk. “About 650 million prescriptions are written each year by GPs alone. Medicines cost the NHS in England over £7 billion every year, 80% of which is spent on branded (patented) products. The industry which has produced these drugs has understandably been described as “world class and a jewel in the crown of the UK economy”.” (The influence of the pharmaceutical industry, 2005, p.3). Pharmaceutical companies will have to reconsider their risk management strategies in order to keep pace with the changes in the industrial risk profiles and the latest business models. “According to the KPMG research, while they have risk frameworks and a “controls culture” in place, from being part of a highly regulated industry, they may not be able to keep pace with their changing business models and industry risk profiles. An additional factor is that Parma companies have tended to operate in business silos.” (Pharmaceutical companies need to improve their risk management framework: KPMG, 2010). Till 1998, industrial risk in pharmaceutical companies in the U.K. was pretty much unheard of. However, after 5 years, the entire situation dramatically changed, with a number of companies reporting critical issues such as underdeveloped product pipelines, product supply, huge competition, delay in product launching, inability to retain talented employees & so on. In order to resolve these issues, companies have begun to adopt new risk management strategies. As a matter of fact, companies have expressed their willingness to review and update their approach towards risk management. Literature Review: Industrial risk is an indispensable component of every business. Like wise, the U.K. pharmacy industry is also prone to numerous risks, triggered by a horde of factors. According to author Martin Stephens, since the past few years there has been substantial increase in the number of pharmacies involved in the manufacture of clinical substances. The major objective of risk management is to eliminate the various risks in the business as well as to considerably improve the quality of the products. As a result, risk management plays an integral role in assuring the quality of the pharmaceutical products and services. Quality assurance (QA) is highly important in the pharmaceutical sector as it helps to consistently ensure the quality of pharmacy products and services. The main reason for this is that patients tend to rely only on those products which they consider safe, well-tested, and effective enough to meet their health care requirements. Moreover, there will be constant demand only for such products and services. “Without assurance that these medicines are relevant to priority health needs that they meet acceptable standards of quality, safety and efficacy, and health service is evidently compromised. In developing countries considerable administrative and technical effort is directed to ensuring that patients receive effective medicines of good quality.” (Quality assurance of pharmaceuticals: A compendium of guidelines and related materials: Good manufacturing practices and inspection, 2007, p.1). Customer satisfaction and catering to customer requirements plays an important role in the success of any business. The QA services offered by the pharmacy industry constitutes a significant role by ensuring the quality of pharmacy products and services in hospitals at all levels. The main function of a QA pharmacist is to monitor or track the progress of various tasks associated with quality assurance/analysis by employing different techniques. A major objective of the QA service in the pharmaceutical industry is to constantly ensure and ascertain the quality of medicine, thus reducing or completely eliminating the risk of distributing defective medicines among patients. In order to avoid the risk in their manufacturing processes, pharmaceutical companies often incorporate the practice of Quality Control (QC) and Good Manufacturing Practices (GMP). Good Manufacturing Practices is associated with those vital aspects of Quality Control which helps to constantly ensure proper manufacturing of products as well as implementation of quality assurance strategies which are suitable for the proposed requirement. Quality Control deals with those aspects of GMP which involve the process of sampling, testing and so on. Both these methods provide effective risk management in the pharmacy industry. For the qualitative and quantitative development of any product or service, a talented and efficient workforce is a prerequisite. The QA service in the pharmaceutical sector provides essential training and guidance to the employees to improve their overall performance in the production process as well as to develop their functional efficiency in the pharmacy industry. Thus, with the help of skilled and talented QA and QC specialists and staff, considerable improvements can be made in the quality of pharmacy products and services. The risk management processes in the pharmaceutical QA services also involve various other tasks such as laboratory testing, implementation of QC medical gas in hospitals and so on. However, it is to be noted here that wrong or poor guidance related to pharmacy products and services could have disastrous effects. “Robust QA systems need to be in place to prevent this happening, especially for the activities that carry the most risk. QA pharmacists have well- established system for risk management of procurement activities and of licensed manufacturing and aseptic preparation services through systems of QC and audit.” (Stephens 2003, pp.75-76). In order to broaden the scope of activity, new risk management processes and methodologies have been adopted in the pharmaceutical industry. According to the author, in Great Britain, certain revolutionary changes are bound to happen in the pharmaceutical sector, particularly in the practice of pharmacy science, by the next decade or so. “Pharmacies will provide a wider range of services supporting healthy living, including helping patients to manage long-term conditions and supporting self- care. In hospital practice, there will be an enhanced clinical role, taking a higher profile in the work of multidisciplinary teams and leading areas such as medicines reconciliation on admission.” (Themes and trends in regulatory reform: Ninth report of session 2008-09, Volume 2: Oral and written evidence, 2009, p.187). With the use of latest technologies and computerization, the risk management activities of pharmaceutical companies can be improved to a great extent. These techniques facilitate the management of business in an easy and efficient manner. Research Questions: 1. What are the different exchange rate risk involved in the Pharmaceutical industry in UK and how it can overcome in the UK market? 2. How the currency exchange rates from the foreign countries affect the UK market? 3. How the fluctuations in the currency rate impact up on pharmaceutical industry in global trade between countries. 4. How Hedging can be used as a tool in evaluating the foreign exchange rate in the UK pharmaceutical industry? Sampling population: Sampling refers to the statistical performance that is based on the selection of certain observations. Sampling is a significant phase in data collection.”The sample is a subset of a population. Since it is usually impractical to test every member of a population, a sample from the population is typically the best approachavailable.Inferential statistics generally require that sampling be random.” (Hyperstat online contents, n.d.). The sampling population is one of the fundamental principles of sampling. It refers to the total number of items about which the desired information is required. The attributes that are the objects of the study are referred to as ‘characteristics’ and the units possessing them are called the ‘elementary units’. The aggregate of the such units are referred as ‘the population’. The population could be finite or infinite. The population is said to be ‘finite’ if it consists of a fixed number of elements and offers the possibility to enumerate the totality of the population.For instance, in the case of the population in a pharmaceutical company, finite population refers to the number of workers in the company. An ‘infinite’ population is not theoretically driven and there is agony in the observation. The sampling in risk analysis could be finite or infinite, or it could be internal or external to the firm. The internal risks associated with a firm could be considered as ‘finite’. The risks that are to be analyzed in the macro-environment are regarded as the ‘infinite’, as it consists of a keen observation of the environment that differ from the sampling limit. Sampling procedure and Size: “Take time and effort to work out your sample correctly if you’re conducting a large scale survey.” (Do, 2010). In the context of risk analysis in a pharmaceutical company, two costs are to be considered: the first one relates to the the cost of collecting the data and the second one, to the cost of the incorrect inferences resulting from the data. The researcher has to provide more concentration to the numerous inferences that might originate from the data. If a systematic bias generates as a result of the errors in the sampling procedures, it cannot be minimized or nullified by escalating the sample size. In a pharmaceutical company, factors which involve risks have to be taken into consideration in the initial observations. An appropriate sampling frame and measuring device must be chosen. The researcher is the person who decides the type of the sample that is to be used in selecting the sample items. The sample procedure is based on the sample design which explains the type of sample to be used. Sampling Size: The sample size refers to the number of items that are selected from the population to represent a sample. The sample size should be optimum and must accomplish the efficiency, effectiveness and reliability of the methodology that is executed in the design. The size of the population limits the sample size. The parameters of interest must be kept in mind, while deciding the size of the sample. Cost is yet another major factor that dictates the size of the sample. The budgetary constraint also plays an important rule in detecting the sample size. In the case of the pharmaceutical industry, the sample size could be chosen from the various operations that a pharmaceutical company is engaged in. “Best estimate of the population size: You do not need to know the exact size of the population. Simply make your best estimate. An inaccurate population size will not seriously affect the formula computations. If the population is very large, this item may be left blank.” (The statistic calculator: Statistical analysis tests at your fingertips, 2010). Methodology Philosophy: “Methodology can properly refer to the theoretical analysis of the methods appropriate to a field of study or to the body of methods and principles particular to a branch of knowledge. In this sense, one may speak of objections to the methodology of a geographic survey.” (Methodology, 2010). Methodology could be defined as the systematic way to solve a research problem. In other words, it could be referred to as the philosophy of studying how the research can be done scientifically. There are three types of methodologies in risk analysis namely; Qualitative method ,Quantitative method and the Hybrid method. The quantitative method is that aspect of methodology which deals with creating the awareness of the risk in the market. The qualitative method, on the other hand, consists of the identification of the different factors that are involved in the risk analysis of the pharmaceutical company. The hybrid method is a combination of both the methodologies and is a much more intensive method of risk analysis. Methodology: Methodology – Design: “Design Methodology refers to the development of a system or method for a unique situation. Design Methodology stresses the use of brainstorming to encourage innovative ideas and collaborative thinking to work through each idea and arrive at the best solution. Design Methodology also employs basic research methods, such as analysis and testing.” (What is design methodology? 2010). The design methodology facilitates the collection of data using appropriate methods. The design helps to define the topic in the research project. Design methodology basically includes hypothesis preparation and the implications of operation for the analysis of final data. The research design in this context deals with the analysis of risk management in the U.K. pharmacy industry. The design of the methodology should be based on elaborate study and must provide comprehensive details on where the study will be done, why the study is made, the type of data, data collection, the duration of study etc. The design methodology is very much helpful for the evaluation and analysis of risk management in the U.K .pharmacy industry. Data collection plays an important part in design methodology. It enables the acquisition of data so that significant decisions can be taken with regard to various problems. “Data-collection techniques allow us to systematically collect information about our objects of study (people, objects, phenomena) and about the settings in which they occur. In the collection of data we have to be systematic. If data are collected haphazardly, it will be difficult to answer our research questions in a conclusive way.” (Module 10A: Overview of data collection techniques, n.d.). Questionnaires and interviews are highly effective methods used for data collection in the pharmacy industry. The survey of the UK pharmacy industry can be done using interviews and questionnaires. The questionnaires, basically, consists of a series of questions for collecting information from the people associated with the pharmacy industry. Interview is an important data collection method employed in research methodology. It involves the conversation between people to obtain information regarding various problems, situations etc. Methodology – proposed data analysis: In the data analysis process, the collected data is analyzed. “The analysis plan should be described in detail. Each research question will usually require its own analysis. Thus, the research questions should be addressed one at a time followed by a description of the type of statistical tests that will be performed to answer that research question.” (Walonick 2005). Two types of data analysis are carried out namely; quantitative analysis and quantitative analysis. The quantitative analysis involves analyzing the quantitative data and makes use of statistical and mathematical models for the purpose. The quantitative method relies on the employment of the mathematical and statistical model and the analysis of the hypothesis. The quantitative link acts as the main link between the empirical method and mathematical analysis. Quantitative analysis is done for different purposes such as performance evaluation, measurement etc. Qualitative analysis involves the various methods which are developed for analyzing the quantitative information. “Qualitative Data Analysis (QDA) is the range of processes and procedures whereby we move from the qualitative data that have been collected into some form of explanation, understanding or interpretation of the people and situations we are investigating. QDA is usually based on an interpretative philosophy.” (What is qualitative data analysis? 2010). Methodology – limitations: The proposed research methodology has a number of limitations that needs to be considered. The analysis and evaluation of risk management in the U.K. pharmacy industry can be a highly tedious process. A major limitation could be the failure to collect the precise and proper amount of data that is required for the research. The design must be implemented on the basis of the output required. Sometimes, the method used for data collection may not be efficient or effective enough to provide the required amount of data. Moreover, the data collection process could be highly time-consuming and incur heavy expenses. The assimilated data may not necessarily be accurate and problems can occur during the process of data analysis too. All these limitations will have to be taken into consideration in the analysis of risk management processes. “It has also been recognized that surveys may provide only an assessment of current costs and do not account for ongoing costs and the "dynamics of disability".” (Research Methodology, n.d.). The Gantt chart shows the various areas of research undertaken across a specific timescale: Task Starting date Finishing date Topic selection 30- March 2010 1- April 2010 Sample population 2-April 2010 16-April 2010 Sample: process and size 17-April 2010 30-April 2010 Methodology- viewpoint 31-April 2010 7-May 2010 Methodology- plan 8-May 2010 15-May 2010 Data analysis 16-May 2010 30-May 2010 “A Gantt chart is a graphical representation of the duration of tasks against the progression of time.” (About gantt charts, 2009). Gantt chart is necessary for planning, scheduling and monitoring a project. Conclusion: This paper, essentially, deals with the evaluation and analysis of risk management in the U.K. pharmacy industry. In the Literature review section, the analysis of risk management in the Pharmacy industry is discussed including a comprehensive, in-depth study about the Research methodology and sampling. The areas of research, undertaken across a particular, timescale is given in the Gantt chart. Reference List About gantt charts, 2009. [Online] Gantt Charts. Available at: http://www.ganttchart.com/ [Accessed 5 April 2010]. Do, 2010. [Online] Free Article: Tutorial. Available at: http://e-articles.info/e/a/title/Sampling-DOs-and-DON%60Ts/ [Accessed 5 April 2010]. Hyperstat online contents, n.d. [Online]. Available at: http://davidmlane.com/hyperstat/A10931.html [Accessed 5 April 2010]. Methodology, 2010. [Online] Answers.com. Available at: http://www.answers.com/topic/methodology [Accessed 5 April 2010]. Module 10A: Overview of data collection techniques, n.d. [Online] The International Development Research Center. Available at: http://www.idrc.ca/en/ev-56606-201-1-DO_TOPIC.html [Accessed 5 April 2010]. Pharmaceutical companies need to improve their risk management framework: KPMG, 2010. [Online] Continuity Central. Available at: http://www.continuitycentral.com/news02108.htm [Accessed 5 April 2010]. Quality assurance of pharmaceuticals: A compendium of guidelines and related materials: Good manufacturing practices and inspection, 2007. [Online] World Health Organization, p.1. Available at: http://books.google.co.in/books?id=59s4hlhFKowC&printsec=frontcover&dq=quality+assurance+in+pharma+industry&cd=7#v=onepage&q=&f=false [Accessed 5 April 2010]. Research Methodology, n.d. [Online] Royal New Zealand Foundation of the Blind. Available at: http://www.rnzfb.org.nz/newsandevents/researchanddevelopment/costofblindness/costofblindnessreport/2 [Accessed 5 April 2010]. Stephens, M., 2003. Hospital pharmacy. Pharmaceutical Press, pp.75-76. The influence of the pharmaceutical industry, 2005. [Online] Authority of House of Commons, London: The Stationery Office Limited, p.3. Available at: http://docs.google.com/viewer?a=v&q=cache:05_4S9PvC9cJ:www.parliament.the-stationery-office.co.uk/pa/cm200405/cmselect/cmhealth/42/42.pdf+%22pharmacy+industry+in+UK+Research+questions%22&hl=en&gl=in&pid=bl&srcid=ADGEESgmC_-N6COM2eugXDpkkHmqgTS2n9iR-bPDdi7bDnLLnn1v4y65NPfwEl0jU4nX6fJ11I351YWf2QdawBPfjASv0KNXp8iJN-tgpCS6-PneVTIl_fpADGfuzwIYL_ZN9MVLEQ0H&sig=AHIEtbSiD18d2Fvcz7MlHcpn4umSZUlu9g [Accessed 5 April 2010]. Themes and trends in regulatory reform: Ninth report of session 2008-09, Volume 2: Oral and written evidence, 2009. [Online] The Stationery Office, p.187. Available at: http://books.google.co.in/books?id=bYZKURsXguYC&pg=PA188&dq=risk+management+in+UK+pharmacy+industry&hl=en&ei=3h63S5G4F4qxrAecqc3DCg&sa=X&oi=book_result&ct=result&resnum=6&ved=0CFoQ6AEwBQ#v=onepage&q=risk%20management%20in%20UK%20pharmacy%20industry&f=false [Accessed 5 April 2010]. The statistic calculator: Statistical analysis tests at your fingertips, 2010. [Online] StatPac. Available at: http://www.statpac.com/statistics-calculator/sampling.htm [Accessed 5 April 2010]. Walonick, D., 2005. Elements of a research proposal and report. [Online] StatPac. Available at: http://www.statpac.com/research-papers/research-proposal.htm#chapter-3 [Accessed 5 April 2010]. What is design methodology? 2010. [Online] DegreeDirectory.org. Available at: http://degreedirectory.org/articles/What_is_Design_Methodology.html [Accessed 5 April 2010]. What is qualitative data analysis? 2010. [Online] School of Human & Health Sciences, University of Huddersfield. Available at: http://onlineqda.hud.ac.uk/Intro_QDA/what_is_qda.php [Accessed 5 April 2010]. Read More