Principal Risks and Uncertainties

The Group and the Company are required to give a description of the principal risks and uncertainties which they face, details of which are set out below.

 

Details of the Group’s internal control and risk management systems are also set out in the Directors’ Statement of Corporate Governance.

 

Risk

Mitigation

Major health policy change and/or continued austerity gives rise to a significant deterioration in the ongoing ability of governments or other payers to fund healthcare, which may adversely affect the Group’s business or business model in affected states.

The Group’s operations are diversified through product and service offerings and geographically. The Group monitors developments on an ongoing basis and continuously seeks to address developments through products or services that match changing requirements, as well as modifying operational practices and underlying business models.

Significant changes in pharmaceutical distribution, particularly by reason of:

  • changes in supply chain models;
  • a significant increase in generic products; or
  • increases in the parallel trade of pharmaceuticals,may adversely affect the Group.

The Group’s strategy fundamentally anticipates a changing market. The Group monitors developments closely through market intelligence and the maintenance of strong relationships within the industry to ensure changes are identified and appropriately responded to.

All of the Group’s activities are subject to stringent quality and other standards. A failure to meet those standards could result in operating licenses being withdrawn or suspended, and products and services being defective or failing to meet medical, legal and other requirements. This could lead to reputational and financial damage to the Group.

Maintenance of quality standards is prioritised across the Group with a comprehensive, rigorous quality framework and organisation supporting all aspects of the Group’s operations, which is audited to best in class standards.

A failure to appropriately identify and manage financial risks arising from the present global economic environment may give rise to adverse financial performance or unexpected impairments or losses.

The Group applies rigorous processes for the identification and mitigation of financial risk.

A restructuring of the Eurozone or its membership could result in a foreign exchange exposure which does not currently exist, arising from the Group’s assets and liabilities being denominated in euros and its euro cash balances.

The Group actively monitors and manages currency risk. However, the Group does remain exposed to systemic risks affecting the Eurozone and its members.

Acquisitive growth is central to United Drug’s strategy. A failure to execute and properly integrate significant acquisitions may adversely affect the Group.

All potential acquisitions are rigorously assessed and evaluated to ensure the Group’s strategic and financial criteria are met. Comprehensive integration plans are developed for all acquisitions and executed by experienced management.

The Group is subject to significant legal and regulatory obligations, specifically in respect of:

  • protection of patient information;
  • health and safety; and
  • the manner in which it deals with healthcare professionals in the promotion or sale of healthcare products where in each case non-compliance could result in the withdrawal of operating licenses, significant liability and reputational risk.

The Group continually reviews its activities and the legal and regulatory obligations associated with them, and has implemented systems to ensure that compliance is at all times attained.

The success of the Group is built upon an effective management team committed to achieving a superior performance in each division. Should the Group not attract, retain or develop suitably qualified and motivated employees, this could have an impact on business performance.

Succession planning, remuneration policies and management development are monitored by the Group to ensure they remain relevant and appropriate.

Group Technology Systems (IT/IS) fail to meet business requirements or are rendered inoperable (whether by external interference, failure or a failure to properly execute the implementation of new or improved systems), exposing the Group to adverse financial consequences.

 

A comprehensive business technology strategy has been implemented, which includes monitoring and review systems to ensure it continues to align with and fully meets the requirements of, the Group’s overall strategic intent. Robust protocols, processes and systems are in place to identify, resolve and mitigate against external interference and systems failures, and ensure new or improved systems are executed without business risk.

 

The nature of the Group’s business requires it to hold for its own account or the account of customers, significant levels of stock in a limited number of locations, which if damaged or destroyed could give rise to business interruption and significant liability to the Group.

The Group maintains adequate insurance coverage for all relevant insurable risks, and as far as possible reduces legal liability to customers through robust contractual arrangements. Business continuity plans are in place to limit any business interruption that may arise from loss of stock.

The Group operates a number of defined benefit schemes. The funding levels of these schemes may be adversely affected by volatility in asset valuations and so give rise to a requirement to make significant cash contributions.

The Group has implemented strategies to mitigate against the ongoing cost of its defined benefit pension schemes and closely monitors the ongoing cost of those schemes.