Gerald.Grealy_0SC20 pdf latest

Examinations of the adequacy and impact of Supplier Risk
Management strategies used in the Life Science sector.
By:
Gerald Grealy
BBS Business and Management
A Research Dissertation submitted in partial fulfilment for the Degree of Master
of Science in Management of Operations of Dublin City University, Dublin.
Research Supervisor: Dr. David McKevitt
School: Oscail
Discipline: Management of Operations
Date of Submission: 31st
August 2014

2 | Supplier Risk Management
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Declaration of Authorship
Dublin City University
Student Name: Gerald Grealy
Student Identification Number: 13112368
Discipline: MSc Management of Operations
Module Code: OSC_20
Date of Submission: 31/August/2014
Research Supervisor: Dr. David McKevitt
Title of Dissertation
Examinations of the adequacy and impact of Supplier Risk Management
strategies used in the Life Science sector.
Declaration of Authorship:
'I hereby certify that this material, which I now submit for assessment on the programme of
study leading to the award of Master of Science in Management of Operations is entirely my
own work and has not been taken from the work of others save and to the extent that such
work has been cited and acknowledged within the text of my work.'
Signed: _Gerald Grealy
Date: __31/8/2014__

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Research Ethics Declaration
Declaration by Gerald Grealy:
‘The information contained here is, to the best of my knowledge and belief,
accurate. I have read the University’s current research ethics guidelines, and
accept responsibility for the conduct of the procedures set out in the attached
application in accordance with these guidelines, the University’s policy on
conflict of interest and any other condition laid down by the Dublin City
University Research Ethics Committee or its Sub-Committees. I have attempted
to identify all the risks related to this research that may arise in conducting this
research, and acknowledge my obligations and the rights of the participants.’
‘I have declared any affiliation or financial interest in this research or its
outcomes or any other circumstances which might present a perceived, potential
or actual conflict of interest, in accordance with Dublin City University policy
on Conflicts of Interest.’
Signature: Gerald Grealy
Print Name: GERALD GREALY
Student ID Number: 13112368
Date: 31/8/2014

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Acknowledgments
I would like to begin by thanking all the DCU academic and supporting staff in particular Mr.
Colm Ward. I have learned a great deal over the last academic year due to rigorous
attention to detail in module delivery and in-depth feedback in particular from Mr. John
Byrne.
A special thanks goes to my supervisor Dr. David McKevitt in guiding and directed this
research along the process from start to finish and also to Dr. Anne Morrissey who
facilitated and communicated the process in a clear and concise manner.
I would like to acknowledge my work colleagues that facilitated my efforts to take part in
this Masters journey over the past year.
To the participants in this research I express my gratitude for taking time to contribute to
this field of study.
Through the continued encouragement of my friends I am eternally grateful.
Finally, I wish to thank my parents – Helen and James for all their support and not least my
sister Jayne and my niece Sophie who inspired me and more importantly kept me motivated
throughout the year.

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Table of Contents
1 INTRODUCTION.................................................................................................................14
1.1 Background ..........................................................................................................................................14
1.2 Key Issue...............................................................................................................................................15
1.3 Scope of Research.................................................................................................................................16
1.4 Research Method .................................................................................................................................16
1.5 Structure of Dissertation ......................................................................................................................17
2 LITERATURE REVIEW.........................................................................................................18
2.1 Introduction .........................................................................................................................................18
2.1.1 Literature Map...................................................................................................................................18
2.2 Sector Overview ...................................................................................................................................20
2.2.1 Market Characteristics (Marketline Report)......................................................................................20
2.2.2 Industry Value Forecast.....................................................................................................................21
2.2.3 Conclusion .........................................................................................................................................22
2.3 Irish Life Science Backdrop....................................................................................................................23
2.3.1 Key Irish Statistics..............................................................................................................................23
2.3.2 Export Figures....................................................................................................................................23
2.4 Risk Overview.......................................................................................................................................24
2.4.1 Defining Risk ......................................................................................................................................24
2.4.2 Categories/Types of risk ....................................................................................................................25
2.5 Drivers of Risk.......................................................................................................................................29
2.5.1 Global Risk Drivers.............................................................................................................................29
2.5.2 Supply Chain Risk Drivers ..................................................................................................................30
2.5.3 Sector Risks Drivers ...........................................................................................................................32
2.6 Risk Frameworks ..................................................................................................................................33
2.6.1 Introduction.......................................................................................................................................33
2.6.2 Risk Management Frameworks .........................................................................................................34
2.6.3 Strategic Risk Frameworks.................................................................................................................35

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2.6.4 Operational Risk Frameworks............................................................................................................39
2.6.5 Financial Risk Frameworks.................................................................................................................46
2.6.6 Hazard Risk Frameworks ...................................................................................................................47
2.7 Gap Analysis of Frameworks and Literature .........................................................................................49
2.7.1 Introduction.......................................................................................................................................49
2.7.2 Lack of measurement and broad characteristics...............................................................................49
2.7.3 Tendency to view Supply Chain Risk in Isolation...............................................................................49
2.7.4 Conclusion .........................................................................................................................................50
3 RESEARCH METHODOLOGY ..............................................................................................51
3.1 Introduction .........................................................................................................................................51
3.2 Research Problem Statement ...............................................................................................................51
3.3 Importance and justification of Topic ...................................................................................................52
3.3.1 Trend in Risk Literature .....................................................................................................................52
3.4 Objectives.............................................................................................................................................54
3.5 Research Philosophy.............................................................................................................................54
3.5.1 Qualitative and Quantitative .............................................................................................................55
3.6 Research Choice....................................................................................................................................56
3.7 Deductive or Inductive..........................................................................................................................57
3.8 Defining features of Case Study approach ............................................................................................58
3.8.1 Weaknesses of Case Study approach ................................................................................................58
3.8.2 Benefits of Case Study approach.......................................................................................................58
3.9 Research Strategy.................................................................................................................................59
3.9.1 Design - Survey Methodology for Case study and Life Science Sector ..............................................61
3.9.2 Design - Case study best practice ......................................................................................................62
3.9.3 Sector focused Survey .......................................................................................................................62
3.10 Participants & Data Collection .........................................................................................................63
3.10.1 Participants...................................................................................................................................63
3.10.2 Data Collection..............................................................................................................................64
3.10.3 Research Credibility and Validity ..................................................................................................65

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3.11 Conclusion .......................................................................................................................................66
4 RESEARCH FINDINGS AND ANALYSIS.................................................................................67
4.1 Introduction .........................................................................................................................................67
4.2 Case study and results ..........................................................................................................................67
4.2.1 Organisation Background ..................................................................................................................67
4.3 Phase two: Results from sector survey .................................................................................................73
4.4 Findings versus Objectives....................................................................................................................78
4.4.1 Introduction.......................................................................................................................................78
4.4.2 Case Study synopsis...........................................................................................................................78
4.4.1 Sector Study synopsis (Macro View) .................................................................................................79
4.5 Conclusion............................................................................................................................................80
5 DISCUSSION ON FINDINGS................................................................................................81
5.1 Introduction .........................................................................................................................................81
6 CONCLUSION AND RECOMMENDATIONS .........................................................................82
6.1 Introduction .........................................................................................................................................82
6.2 Limitations............................................................................................................................................82
6.3 Possibility of further research...............................................................................................................83
6.3.1 Food Sector Analysis..........................................................................................................................83
6.3.2 Irish Market Analysis .........................................................................................................................84
6.3.3 Supplier Risk Framework ...................................................................................................................84
7 BIBLIOGRAPHY..................................................................................................................85
8 APPENDIX..........................................................................................................................94
8.1 APPENDIX A - Case study communication.............................................................................................94
8.2 APPENDIX B - Life science survey email communication;......................................................................95

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8.3 APPENDIX C - Finalised Survey Questionnaire.......................................................................................96
8.4 APPENDIX D - Research Ethics Clearance ..............................................................................................99
8.5 APPENDIX E- Sample Porter’s 5 forces for Future Irish market research .............................................100
8.6 APPENDIX F- Irish life Science Directory (Gathered from SFI)..............................................................102
8.7 APPENDIX G- Irish life Science FDI by location (SFI) ............................................................................105

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List of Figures
Figure 1: Global pharmaceuticals, biotechnology & life sciences category ............................20
Figure 2: Global pharmaceuticals, biotechnology & life sciences share. ................................21
Figure 3: Global pharmaceuticals, biotechnology & life sciences % share, by value ..............21
Figure 4: Forces driving competition in the global pharma, biotechy & life sciences.............22
Figure 5: Forces influe the likelihood of new entrants............................................................22
Figure 6:Irish Goods and Exports Statistics , 2012-13. ............................................................23
Figure 7:Exports by Country. ...................................................................................................24
Figure 8:Goods Exports and Imports classified by commodity and principal countries. ........24
Figure 9:Images of Risk. ...........................................................................................................26
Figure 10:Current Risk Assessements......................................................................................27
Figure 11:Porters’ Value Chain ................................................................................................28
Figure 12:Top Five Global Risks in Terms of Likelihood 2007-2013. .......................................29
Figure 13: Top Five Global Risks in Terms of Impact 2007-2013.............................................29
Figure 14:Typical life cycle of a drug........................................................................................33
Figure 15:Enterprise Wide Risk Management.........................................................................34
Figure 16: ISO 31000 Risk Management Series .......................................................................35
Figure 17: Strategic Risk Calculator .........................................................................................37
Figure 18: Strategic Risk Map ..................................................................................................38
Figure 19: Supply chain risk classification................................................................................40
Figure 20: Supplier Risk Management Framework..................................................................40
Figure 21: Typical Pharmaceutical Supply Chain .....................................................................40
Figure 22: Supply Netword Risk Tool.......................................................................................41
Figure 25: Erickson Risk Managment.......................................................................................44
Figure 26: Erickson Supplier Visability.....................................................................................44
Figure 27: Supplier Risk Management interactions with internal and external functions......45
Figure 28: Supplier Risk Framework ........................................................................................45
Figure 29: Linking supply chain performance to shareholder value. ......................................46
Figure 30:Primary causes for drop in stock price (number of companies). ............................47
Figure 31: Business Continuity Plan.........................................................................................48

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Figure 32: Catastrophic risk management matrix ...................................................................48
Figure: 33 Risk litterature Search; 1980-2013:........................................................................53
Figure 34: Risk litterature by discipline; 1980-2013:...............................................................53
Figure 35: The Research Onion................................................................................................56
Figure 36: Frequency of Four Methodoligical Terms...............................................................57
Figure 37: Research Strategy ...................................................................................................60
Figure 38: Pharma Risk Knowledge: Broad and Category .......................................................68
Figure 39: Pharma Supplier Risk prioritisation ........................................................................69
Figure 40: Pharma Supplier /Supply Chain Issues....................................................................69
Figure 41: Pharma Risk Sophistication.....................................................................................71
Figure 42: Phamra Risk Category Knowledge..........................................................................71
Figure 43: Iridigenous reilance on sector ................................................................................72
Figure 44: Pharma Patent Cliff Affect ......................................................................................72
Figure 45: Risk Knowledge: Broad and Category.....................................................................73
Figure 46: Supplier Risk prioritisation......................................................................................74
Figure 47: Supplier /Supply Chain Issues.................................................................................74
Figure 48: Risk Sophistication ..................................................................................................76
Figure 49: Risk Category Knowledge........................................................................................76
Figure 50: Iridigenous reilance on sector ................................................................................77
Figure 51: Patent Cliff Affect....................................................................................................77

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List of Tables
Table 1: Dissertation Structure................................................................................................17
Table 2: Risk Descriptions and Sources....................................................................................25
Table 3: Disruption and Resilience Literature..........................................................................39
Table 4: Deductive or Inductive...............................................................................................57
Table 5: Case Study Best Practice ............................................................................................62
Table 6: Pharmaceutical Case Study Participants....................................................................63
Table 7: Case Study Participants by department.....................................................................63
Table 8: Sector Survey Participants by department ................................................................64
Table 9: Pharma Case Study facts and figures.........................................................................67
Table 10: Case Study Survey - Supplier Issues and Risks .........................................................70
Table 11: Analysis of Survey - Supplier Issues and Risks .........................................................75
Table 12: Case Study v’s Objectives.........................................................................................78
Table 13: Sector Study v’s Objectives......................................................................................79

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Glossary of Acronyms
CSO Central Statistics Office
EI Enterprise Ireland
SFI Science Foundation Ireland
FDI Foreign Direct Investment
SCM Supply Chain Management
SCRM Supply Chain Risk Management
CBD Convention on Biological Diversity
WHO World Health Organisation
IP Intellectual Property
IDA Industrial Development Agency
R&D Research and Development
JV Joint Venture
WEF World Economic Forum
GDP Gross Domestic Product
OECD Organisation for Economic Co-operation and Development
ISO International Organization for Standardization
BSC Balanced Scorecard
FMEA Failure Mode Effective Analysis
CAPM Capital Asset Pricing Model
SFI Science Foundation Ireland
SCV Supply Chain Visibility
IBEC Irish Business and Employers Confederation
ESRI Economic Social and Research Institute
BCP Business Continuity Planning

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Abstract
Purpose: In light of the fact that we are now in a connected world where news and
information is constant and ubiquitous, risks which once may have gone unnoticed are no
longer afforded silence. Major risks of any kind from disruptions in supply, contamination to
financial risks can be catapulted throughout the media and have real time tangible
detrimental effects from loss of investor confidence, loss of credibility or in extreme cases
closures. In Ireland’s economic recovery it is an imperative for both foreign direct
investment (FDI) and indigenous organisations to strive for competitive advantage. Such an
advantage can be diminished and eroded rapidly none quicker than neglecting to manage
risk in its many forms. Organisations are now encountering emergent risks on a daily basis
as the business environment changes with increasing competition, complex supply chains,
globalisation, outsourcing, product complexity and intricate networks which now
predominate the landscape. Incidents in recent times such as the horse meat adulteration
scandal (Express: 2013) and Primark’s public outsourcing problems with the Savar building
collapse in 2013 (Primark: 2013) bare this sentiment all too well. It is clear that in order to
compete and to survive organisations must understand how to examine, interpret and
manage risk effectively. The life science sector is crucial for the Irish economic recovery.
This sector has been chosen in this research to assess current knowledge in the area of risk
due to the complexity of the supply chains, it’s highly regulated nature and the large volume
of suppliers both from FDI and supporting indigenous companies. Furthermore it is a sector
which the Irish exchequer has come to rely on heavily for both exports and employment.
This dissertation will delve into the rudimentary elements of risk, whilst assessing
frameworks both in academia and practitioner literature with respect to risk.
The purpose of the dissertation is to gain clarity in the area of supply chain and supplier risk
and the gaps that exist while analysing the condition of the pharmaceutical, biotechnology
and medical device industries within what can be broadly be defined as life sciences. This
sector holds the key to the success of the Irish economy and therefore it is critical that the
state of the global industry is assessed, examining the importance to the Irish economy of its
employment both direct and indirect, also investigating the export levels which effect
greatly the overall balance of trade.

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1 Introduction
1.1 Background
The damaging effects of recalls, supplier failure, contamination and disruptions are a
frequent stark reminder of how supply chain and supplier risk can leave an organisation in a
state of shock. Many well-known examples have plagued the landscape in the last twenty
years for example the decimation of Ericsson’s mobile phone operations when on the 18th
March 2000 in Albuquerque a fire as a result of a lightning strike in a sub supplier plant
caused damage and disruption of radio frequency chips. The lack of response from Ericsson
in contrast to the superior supplier risk management approaches of its main rivals Nokia
ultimately forced Ericsson to partner with Sony thus losing a considerable share of the
mobile phone market to Nokia as a result. (Norrman,2004: 434-456)
The Ericsson story is not unique and demonstrates that risk is at every corner, it is a fact of
life, whether driving a car to work or buying a house. The insurance industry and in
particular the actuarial business has long relied on mathematics and statistical measures to
calculate risk. However, supply chain management (SCM) has been an emerging discipline
since the term was first coined in 1982 by Keith Oliver. Martin Christopher (2011:13)
defines the supply chain as;
“ the network of organisations that are involved through upstream (supplier end of
the supply chain) and downstream (customer end of the supply chain) linkages in the
different processes and activities that produce value in the form of products and services in
the hands of the ultimate consumer.”
As the discipline has evolved so too has the rationale and logic used in classifying precisely
its function in business operations. SCM has undoubtedly led to efficiencies and greater
controls of complex intricate supply networks that organisations now come to rely on. That
being said, with such an evolving discipline comes deficiencies in both understanding and
application, risk management being one such area whereby more research and frameworks
are needed in order for organisations to strive in this field.

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Gaps in the topic of risk and in particular for supply chain risk management (SCRM) have
been identified and aim to enhance further research into this area in order to offer a
consistent approach that may be adopted across organisations to understand risk.
Risk frameworks are underdeveloped and non-sector specific as a result gaps have led to
disparate and fragmented approaches whereby inconsistencies and reactive responses to
incidents have been commonplace.
1.2 Key Issue
The key issue isolated in underpinning this research into the field of risk is the nature by
which supply chain risk is managed currently in organisations. The business setting has
changed in recent years with SCM and other supporting areas such as Procurement widely
practiced by organisations. However, these disciplines are still in their infancy and changing
rapidly, moving from purely tactical decision making roles to more strategic and value
adding disciplines. (Tassabehji, & Moorhouse 2008,55:68) (Giunipero and Pearcy,2000 4:15)
Supply chain risk has been trailing behind all areas of business whereby coherent, consistent
and well established frameworks are not currently practiced nor in existence. To ensure
competitive advantage and value creation supply chain risk has to take center stage in all
disciplines within an organisation as Christopher (1992) suggests “supply chains compete,
not companies.”
The problems that are encountered when risk has not been addressed can manifest quickly
as organisations find themselves ill equipped to understand; the role that they play in risk,
how to measure risk, the types of risk that exist, how to treat risk and how to protect and
learn from experiences. Contributing to the risk is that new and advanced information
systems are forming the backbone of global supply chain operations. (Khan, 2011) This in
turn has meant that technology has led to highly complex systems.
It is clear that events do happen and larger organisations need to take credence of this fact
as risk has been an afterthought rather than a factor in everyday business operations. In
particular SCRM can be viewed as a strategic management activity in firms given that it can
affect operational, market and financial performance of firms. (Narasimhan & Talluri2009
114:118) In organisations that exist now it’s not a case of “if” a risk will occur during the day

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to day business but rather “how” to build a robust and more importantly a resilient supply
chain (Christopher et al: 2004) that copes with unexpected risks of any kind either upstream
or downstream in the organisation.
1.3 Scope of Research
The study will focus primarily on the deficit in supplier/supply chain risk knowledge.
The available literature on risk will be analysed in the literature review which will involve an
analysis of available frameworks for risk in general and more specifically the supply chain. A
critical review of the literature will form the basis of a gap analysis and generation of
research questions.
Section 3.4 of this dissertation outlines the four main objectives of this research. The
antecedence of all these objectives is the primary research question which pertains to the
adequacy and knowledge of Supplier Risk Management strategies and or frameworks in the
life science sector.
The research objectives will be met with the aid of participant’s responses to a set of ten
questions which have been created with the topic of risk and supplier risk at the core. These
questions have been created to meet the research objectives posed in this paper.
1.4 Research Method
The research method chosen to form the basis of the research is a mixed methods
approach. The main research was conducted two fold,
1. A case study of a Japanese Pharmaceutical with 2 manufacturing plants based in
Ireland – to obtain an understanding of one industry specific organisation in relation
to risk and supplier risk
2. Sector wide analysis of the same survey to randomise the sample and create a sense
as to the market knowledge of risk across the entire sector.
The research questions are primarily quantitative in design to understand the relationship of
variables by means of statistical and graphical analysis. A research question was designed in
a qualitative manner to understand and illicit the problems that have occurred as a result of
supplier or supply chain issue in the last 18 months. The two surveys were identical in

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approach and differ only in regards that the case study survey the respondents have been
carefully chosen. The sector wide survey was completely anonymous sent to a distribution
list of all life science companies based in Ireland, this includes pharmaceutical,
biotechnology, medical devise and other related industries in the sector. This two phased
approach has meant a clear understanding of how one case study pharmaceutical
organisation understands risk and a view on the entire sector and what threats they are
facing in the area of risk.
1.5 Structure of Dissertation
The structure of the thesis is encapsulated in six chapters;
Chapter 1 Introduction
Introduces the thesis, detailing the scope of the research whilst offering background information into the
topic of risk and the key issues the research will address.
Chapter 2 Literature Review
The literature review discusses the literature that exists in relation to risk also providing an analysis of
risk frameworks and a view on the chosen industry sector and resulting gaps.
Chapter 3 Research Methodology
Displays the types of research, the choice of research and the strategy outlining the advantages and
disadvantages. Investigation into the research problem while matching the objective of the thesis. The
final piece of this chapter looks at the data, structure and participants that contributed to this research.
Chapter 4 Research Finding and Analysis
This chapter details the results from the case study and industry led survey which will enable the
researcher to further investigate and aid in evaluate responses to match objectives set out in chapter 3.
The analysis for this chapter will consist of both quantitative and qualitative techniques.
Chapter 5 Discussion on Findings
Findings from the literature analysis with the addition of the case study research will be integrated and
dissected for a clear picture of risk.
Chapter 6 Conclusion and Recommendations
This chapter will conclude all of the findings and research questions and provide a holistic view taking all
conclusions and applying them to the subject matter of risk. The limitations and future possibilities for
research will be addressed in this concluding section.
Table 1: Dissertation Structure

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2 Literature Review
2.1 Introduction
In obtaining a clear understanding of the subject matter a literature review was conducted
as outlined in this chapter. The literature review consists of a literature map which
delineates graphically the broad fundamentals and understanding of risk that exist. The
research sector and background is addressed also in this chapter in order to guide and focus
the research. The material contained in this chapter was gathered by utilising the DCU
library database facility augmented with content from traditional sources such as books,
industry reports, online research through Google scholar and state agency websites. This
mix of primary research helped in order to critically evaluate the subject matter. The
literature was prioritised with academic journals holding most relevance as suggested by
Creswell (2003:38).
Prioritisation of literature review;
Academic Journals Books Industry/Practitioner/Market Reports Merge
2.1.1 Literature Map
In order to convey the importance of the research and give the reader an overview of the
contributing authors and themes a literature map was constructed. This visual picture is
hierarchical Janovec (2001) cited in Creswell, (2003:40). This hierarchical design is a top-
down approach whereby major topics, subtopics and sub-subtopics are presented in levels.
Creswell (2009:34)

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Examinations of the adequacy and impact of Supplier Risk Management strategies used by
organisations in the Life Science sector.
Risk Definition Risk Categories Global Market Overview
Irish Market Overview
Risk Life Science Sector
Gap Analysis
Risk Frameworks
General - Oxford Dictionary
Scientific - Royal Society
Scientific Probability
(Mitchell)
(Lowrance)
(Haimes)
(Manuj, I., Mentzer, J.)
Alternative
(Hetland)
(Waters)
(Knights)
Strategic
(Slywotzky et al.)(Richie et
al.)(Ostring)
(Simmons) (Andersen)
Operational
(Slack et al.) (Meulbrook),
(Ostring) (Porter)
Financial
(Meulbrook), (Ostring)
Hazardous
(Meulbrook), (Ostring)
Strategic - (Drzik & Slywotzky 2005) (Simmons 1999)
Operational - (Christopher & Peck 2004) (Harland et al. 2003) (Matook et al. 2009) (Kraljic - Cheverton, and Velde, 2011)
Financial - Hendricks & Singhal (2003
Hazardous - Knemeyer et al. (2009)
Definitions – WHO, CBD.
Market line Industry Profile report
2011
Key statistics – IDA & EI
Export Figures - CSO
Risk Drivers
Global; WEF Risk report
Supply Chain;
Increasing Complexity in Supply Chain (Chopra and Sodhi) (Harland et al. 2003)
Product service complexity (Harland et al. 2003)
Outsourcing and Partnerships (Child et. al 1998)
Globalisation – (Prasad & Sounderpandian 2003) (Harland et al. 2003)
Technology and E -business – (OECD 2003) (Combe 2006) (Kalakota &
Robinson 2004)
Sector Risks;
Shortening Product Life-Cycle
(Shah 2004) (Butler 2002)
Patent Cliff
(IBEC 2014)(ESRI2013) (Dep.
of Finance 2013)

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2.2 Sector Overview
This dissertation explores the life sciences sector which includes the pharmaceutical, medic
al devices and biotechnology industries. The following overview documents the global state
of these areas which are intertwined and interconnected and play a fundamental role along
each industries supply chain.
There are many definitions of each industry with the Convention on Biological Diversity
(CBD) defining biotechnology as “any technological application that uses biological systems,
living organisms, or derivatives thereof, to make or modify products or processes for specific
use”. The pharmaceutical industry has been defined as “the discovery, development, and
manufacture of drugs and medications (pharmaceuticals) by public and private
organisations”. (Britannica online) The World Health Organisation (WHO) classify
pharmaceutical products as what’s “more commonly known as medicines or drugs – are a
fundamental component of both modern and traditional medicine. It is essential that such
products are safe, effective, and of good quality, and are prescribed and used rationally”.
2.2.1 Market Characteristics (Marketline Report)
The market share by way of value is represented in fig 1 as reported in the marketline
report. The pharmaceutical sector represents nearly three quarters of the total share and
includes only ethical drugs for human consumption, ex-factory prices (the value at which
manufacturers sell the drugs to distributors) Biotechnology in 2011 represented a quarter of
the total market share with the industry including companies primarily involved in the
development, manufacturing or marketing of products based on advanced biotechnology
research.
Figure 1: Global pharmaceuticals, biotechnology & life sciences industry category segmentation 2011.
Source: Marketline Report 2011

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The pharmaceutical and biotechnology industry share as shown in fig 2 shows that the top
four companies in the world control nearly 20% of the market. Pfizer in 2011 held over 5%
of the total market share. Forbes (2014) has documented that Pfizer still remains as the top
pharmaceutical producer in the world with drugs that have contributed to this success
including Lipitor used to lower cholesterol and Viagra used for erectile dysfunction.
Figure 2: Global pharmaceuticals, biotechnology & life sciences industry share: % share, by value, 2011.
2.2.2 Industry Value Forecast
As fig 3 shows the growth rate will fluctuate in the sector with a predicted dip in growth rate
for 2016 documented in this report. The factors influencing such a dip is the Patent Cliff
knock on effects, the industry however is predicted to increase year on year in revenue. The
sector is extremely valuable to the world economy as it is a trillion $ sector. The cost of the
Patent expiration from 2014 to 2020 deemed at risk is $259bn of total sales. However, it has
been said that Biological products will see a vast increase and feature more heavily by 2020.
In the pharmaceutical industry the world’s bestselling drug in 2013 was Abbvie’s Humira,
and is projected to be the world’s highest selling product in 2020, with a worldwide sales
forecast of $12.7bn. (Pharmexec: 2014)
Figure 3: Global pharmaceuticals, biotechnology & life sciences industry: % share, by value, 2011.

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A Porters five forces model derived in the marketline report in fig 4 shows that the nature in
this industry group “tends to be high-risk, time-consuming and expensive making it a
substantial barrier to enter the industry”. However in fig 5 you will see that further analysis
that was conducted shows that market growth and supplier accessibility make it quite
attractive for creation of new and emergent companies. The biggest obstacle to overcome
for new entrants being legal compliance and Intellectual Property (IP).
Figure 4: Forces driving competition in the global pharmaceuticals, biotechnology & life sciences industry,
2011.Source: Marketline Report 2011
Figure 5: Forces influencing the likelihood of new entrants in the global pharmaceuticals, biotechnology & life
sciences industry, 2011.Source: Marketline Report 2011
2.2.3 Conclusion
The pharmaceutical and biotechnology industries are fundamental to the world economy,
the sector is predicted to grow year on year for the foreseeable future. However, with the
involvement of many actors in the industry and resources required in production many
challenges will inevitably on a macro market scale from income disparity – can the
customers afford the product? How much water is needed to produce products? These risks
which combined with the organisations inherent risks of strategy, operations, financial and
hazardous risks mean that risk management in this area is paramount.

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2.3 Irish Life Science Backdrop
2.3.1 Key Irish Statistics
In the life science space 81 oversees companies have operations in Ireland.(IDA:2014) A list
of all indigenous life science organisations have been extracted from the Science Foundation
Ireland (SFI) report which can be found in the appendix of this research.
In 2010, research conducted by Enterprise Ireland (EI) found that the pharmaceutical
industry alone within Ireland accounted for employing 24,000 people directly with a further
25,000 employed in the provision of services to the sector. Exports of pharmaceutical and
medicinal products exceeded €19.5 billion making Ireland one of the largest net exporters of
pharmaceuticals in the world. As the IDA state on their website nine of the top ten global
pharmaceutical companies are located in Ireland, with seven out of ten pharmaceutical
blockbusters produced in Ireland. Westport in County Mayo also happens to be the largest
producer of Botox in the world through the US pharmaceutical company Allergan.
(Independent, 2012)
2.3.2 Export Figures
In 2013 goods exports decresed by 5% as shown in CSO reports in fig 6. This has been
attributed somewhat to the Patent Cliff for 2013. As fig 7 shows the pharma-chem exports
by destination are mostly distributed to European Union countries as opposed to the United
Kingdom and United States of America . Fig 8 shows that exports to the UK for Chemicals
and Related Products outweigh all areas including that of Food and Live Animals.
Figure 6:Irish Goods and Exports Statistics , 2012-13.
Source: Central Statistics Office CSO Available
at:http://www.cso.ie/en/media/csoie/releasespublications/documents/externaltrade/2013/gei_dec2013.pdf

24
Figure 7:Exports by Country.
Figure 8:Goods Exports and Imports classified by commodity and principal countries.
2.4 Risk Overview
2.4.1 Defining Risk
The Oxford Dictionary defines risk as to “expose (someone or something valued) to danger,
harm, or loss.” A more scientific definition of risk was provided by the Royal Society (1992)
as ‘‘the probability that a particular adverse event occurs during a stated period of time, or
results from a particular challenge. As a probability in the sense of statistical theory, risk
obeys all the formal laws of combining probabilities.”
Probability and outcome have been furthermore expanded, such as Lowrance (1976) and
Haimes (1998), with Mitchell (1995) defining risk as ‘‘the probability of loss and the
significance of that loss to the organisation or individual.’
Alternative non-scientific approaches of the term define risk as the implications of uncertain
phenomenon in which there is uncertainty about the future, which means that unexpected
events may occur (quantitative) ‘‘measurable’’ uncertainty and (non-quantitative)

25
‘‘unmeasurable’ uncertainty there is only partial knowledge of outcomes in the form of
beliefs and opinions. Hetland (2003)Waters (2007) Knight’s (1921).
Risk Source Description
General Oxford Dictionary To expose (someone or something valued) to danger, harm, or loss
Scientific Royal Society (1992) The probability that a particular adverse event occurs during a stated period
of time, or results from a particular challenge. As a probability in the sense
of statistical theory, risk obeys all the formal laws of combining probabilities,
Scientific
(Probability)
Mitchell (1995)
Lowrance (1976)
Haimes (1998)
Manuj, I., Mentzer, J., (2008)
“The probability of loss and the significance of that loss to the organisation or
individual’
Riskn = P(Lossn) x I (Lossn)
Risk = Probability of Loss x Significance of Loss.
Alternative Hetland (2003)
Waters(2007)
Knight’s (1921)
The implication of an uncertain phenomenon - risk occurs because there is
uncertainty about the future, which means that unexpected events may
occur (quantitative) ‘‘measurable’’ uncertainty and (non-quantitative)
‘‘unmeasurable’ uncertainty there is only partial knowledge of outcomes in
the form of beliefs and opinions.
Table 2: Risk Descriptions and Sources
2.4.2 Categories/Types of risk
Risk is encountered at all stages within the business context. In order to address and
mitigate risk, supply chain risks must be understood. The types of risk that effect
organisations have been broadly categorised under the following areas of strategic,
operational, financial and hazardous. Fig 9 shows that these categories lie within
unknowable and uncertainty factors. As Svensson (2000) reiterates the vulnerability of a
supply chain increases with increasing uncertainty, as would be expected.

26
Figure 9:Images of Risk.
Source: Andersen, T. & Shroder, P. (2010) Strategic Risk Management Practice. New York: Cambridge
University Press,P117.
i. Strategic Risk
Strategy “defines a desired objective, it communicates what will be done, by whom, how
when are where activities will take place, for whom and why the outputs of activities should
be valued.” (Huff et. al, 2009) Strategy has received unparalleled attention in academic
literature with Porter’s How Competitive Forces Shape Strategy (Porter, 1979) and
Mintzbergs Of Strategies: Deliberate and Emergent contributing heavily to this field.
(Mintzberg, 1985) Strategy is an important factor when examining risk as it can refer to a set
of guidelines that influence decisions and behaviour (Levy 1994, 161:178).
Strategic Risk has been defined as “an array of external events and trends that can
devastate a company’s growth trajectory and shareholder value” (Drzik & Slywotzky 2005)
It is seen as the risks that affect or are created by an organization’s business strategy and
strategic objectives. (Deloite, 2012) They are risks that affect or are created by an
organization’s business strategy and strategic objectives. Ritchie & Marshall (1993:163)
state that “a well devised strategy could simultaneously reduce risks and increase returns”.
It has also been shown that there is a correlation among strategy planning, decision making
and risk analysis. (Ostring 2003, 19:24)
Simmons (1999:7) discusses strategy and offers a risk calculator in strategy implementations
and risk. The risks that can emerge from the carrying out of activities can result in risks such
as; demand shortfall (customer risk) customer retention, integration problems, pricing

27
pressure, regulation, R&D, industry or sector downturn, JV or partner losses, and
competitive risk (differentiation) (PWC, 2012) Fig. 10 is a graphic which demonstrates the
importance of strategic risks vs. the lack of coverage that this type of risk receives in
organisations.
Figure 10:Current Risk Assessements.
ii. Operational Risk
Operations as shown in fig 11 is a primary activity in running an organisation and is
concerned with the transformation of inputs and conversion into outputs. Operations
management has been defined by Slack et al. (2010:4) as “the activity of managing the
resources which are devoted to the production and delivery of products and services.”
Porter states “A firm is profitable if the value it commands exceeds the cost involved in
creating the product” (Porter, 2004:38)
Operational risks affect a ﬁrm’s internal ability to produce and supply goods/services
(Meulbrook, 2000), as Ostring (2003,19:24) states “sourcing belongs to operational risks”
another description is provided as an organisation’s ability to execute its strategic plan.
(Deloite, 2012) An effective operations strategy is outlined by (Slack et al., 2010:63) as first
implementing strategy, then supporting strategy and finally driving strategy.
Operational risks can be attributed to cost overrun, operating control ,poor capacity
management, supply chain issues, employee issues Including fraud ,bribery and corruption,
regulations and compliance ,commodity prices ,supply risk (input risk) and reputational risk.
(PWC, 2012)

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Figure 11:Porters’ Value Chain
Source: Porter, M, E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New
York. Simon and Schuster,P58.
iii. Financial Risks
Financial risk exposes a firm to potential loss through changes in financial markets; it can
also occur when specific debtors default. (Meulbrook, 2000) It is the threat of losing an
asset or income and are often related to the treasury function. (Ostring 2003.19:24)
Financial risk includes areas such as financial reporting, valuation, market, liquidity, and
credit risks. (Deloite, 2012) Financial risk areas such as debt and interest rates, poor
financial management, asset losses, goodwill and amortisation and accounting problems.
(PWC, 2012) can also be classed under this category.
iv. Hazard Risks
Hazard risks “can cause damage to assets (for example building or machinery) or intellectual
assets (for example brand or product liabilities) typically hazard risks can be insured”
(Ostring 2003.19:24) These type of risks are out of direct control of the organisation.
(Deloite, 2012) Factors such as macro-economic, political issues, legal issues, terrorism and
natural disasters. (PWC, 2012) are the primary risk factors in hazard risks.

29
2.5 Drivers of Risk
2.5.1 Global Risk Drivers
The World Economic Forum (WEF) produces a report which assesses the macro picture of
global risk throughout the world. In this report the top five global risks in terms of impact
and likelihood are examined as seen in fig 12 and fig 13. These risks are categorised under
economic, environmental, geopolitical, societal and technological areas.
Figure 12:Top Five Global Risks in Terms of Likelihood 2007-2013.
Source:World Economic Forum (WEF) Global Risks 2013.
Figure 13: Top Five Global Risks in Terms of Impact 2007-2013.
Source:World Economic Forum (WEF) Global Risks 2013.

30
2.5.2 Supply Chain Risk Drivers
2.5.2.1 Increasing Complexity in Supply Chains
Aberdeen’s research study of Chief Supply Chain Officers has confirmed that the top
business pressures facing the discrete segment are the “impact of increasing supply chain
complexity (ie. Longer lead times, and lead time variability, or increasing number of
suppliers, partners, carriers, and customers, countries, and logistics channels”) (Lean
logistics, 2014)
Global supply chains require highly coordinated ﬂows of goods, services, information and
money within and across national boundaries. (Harland et. al 2003, 51:62) The global supply
chain dependency can be seen when such geographic disasters like the Japanese Tsunami
repercussion that were felt around the world as the supply of essential manufacturing for
cars dried up. Likewise, the Icelandic Volcano in Iceland in 2010 had effects on supply chains
and exports and imports. (Chopra and Sodhi 2014)
Complex supply chains contribute to risk where it is harder to match demand and supply,
the risk is further compounded when as Gurnani et al. 2012 states that “various supply chain
partners focus on local optimisation, when there is a lack of collaboration among supply
chain partners, and when there is a lack of flexibility in the supply chain”.
2.5.2.2 Product Service Complexity
Customers have come to demand and expect highly complex product and service offerings
this increasing demand for product/service performance and variety, combined with more
complex product/ service and process technologies has led to complexity along all of the
networks within the supply chain.(Harland et. al)
2.5.2.3 Outsourcing and Partnerships
Outsourcing and the collaboration of partnerships have been used extensively in SCM.
Outsourcing has been used for the contracting or subcontracting of noncore activities to
free up cash, personnel, time, and facilities for activities in which
company holds competitive advantage. (Business dictionary)
It involves the use of specialists to provide competence, technologies and resources to
provide parts of the whole. The benefits of partnerships can be that information is

31
enhanced and is transparent, joint coordination, joint learning and problem solving can aid
in mitigation approaches. (Child et. al 1998)
2.5.2.4 Globalisation
Gaining a competitive advantage in international supply chains requires matching the value-
adding activities of a chain with the unique comparative advantages offered by diverse
nations that make up the chain (Prasad & Sounderpandian 2003, 241:250)
Intent, global brands, economies of scale and scope, management of the value chain,
comparative advantage, market access, the growth of free trade and facilitating information
technologies, most recently e-business have contributed to a more globalised environment.
(Harland et. al 2003, 51:62)
2.5.2.5 Technology and E –business
As the OECD (2003:12) states “technological change can reduce some risks while
aggravating others or even creating new ones. Three aspects of emerging technologies will
influence risk: connectedness; the speed and pervasiveness of technological change; and
the fundamental changes in the landscape they might induce.”
Electronic business (e-business) is an integral part of technology within an organisation and
can be defined as “the use of the internet to network and empower business processes,
electronic commerce, organisational communication and collaboration with a company and
with its customers, suppliers, and other stakeholders.”(Combe 2006)
The new market and commercial opportunities afforded by the Internet increase the speed
of change and complexity in supply networks, and consequently increase risk.
Kalakota & Robinson (2004:5) in ebusiness 2.0 roadmap for success remarked that; “CEO’s
are investigating new strategic initiatives to deliver results and many are looking to
technology to transform the business model – in other words harness the power of e-
business.”

32
2.5.3 Sector Risks Drivers
2.5.3.1 Introduction
The life science sector typically will have vast amounts of suppliers due to the nature of
products and the manufacturing process. This translates to risk and complex supply chains
increasing the likelihood of supplier risk as well as suppliers’ suppliers risk (Tier 2) and so on
down the chain. Poor visibility can be attributed to a halt in production along the supply
chain and is growing in importance as a 2006 Aberdeen benchmark report comprising of 150
company whereby 79% of large companies say that the lack of supply chain process visibility
is their top concern.
A very public instance demonstrates how easily a shortfall in supply of a drug can occur as
stocks of commonly prescribed antibiotic Augmentin fell short in 2013 due to manufacturing
capacity issue compounded by the fact that three suppliers of the generic medicine all
purchased the product from the same source. (RTE: 2013) Many risks are exhibited in this
industry type but some are more evident given the nature, sensitivity and storage
requirements within the lifecycle of the product.
2.5.3.2 Shortening Competition Life of Product
The pharmaceutical industry adheres to stringent rules and regulations. However, such
compliance compounded with increase in competition can relate to a shortening of
competition and advantage in the market. A typical competition free life is shortening from
5 to 1-2 years. (Shah 2004, 929:941) An example of how quickly a competitor can capture
the market can be seen in the example of Bayer’s anti-cholesterol drug Baycol was
withdrawn in 2001 due to safety concerns, and the two later entrants Pravachol (from BMS)
and Lipitor (from Pfizer) are now the biggest sellers for their companies (Butler 2002, 9:10)
In fig 14 a typical life cycle for a drug from concept to actual product commercialisation
takes time and heavy investment.

33
Figure 14:Typical life cycle of a drug.
Source: Pharma Chemical Ireland (2013)
2.5.3.3 Product Patents – “Patent Cliff”
The pharmaceutical industry is experiencing what has been classified as a “Patent Cliff” in
which a group of drugs including a global bestseller expires in 2011-2016. A blockbuster
drug is a drug which generates more than a billion US $ per year. The current patent cliff
refers to these so called blockbuster drugs which account for €200 billion in global annual
sales and will impact on a quarter of the value of the sector. Although this cliff has been
known for quite some time, it still has contributed to a reduction of 0.3% in GDP for 2013 in
the Irish economy. (IBEC:2014)(ESRI:2013) To mitigate the Patent Cliff pharmaceutical
organisations have shifted to a more Research and Development with also some high profile
mergers have taken place with Pfizer's acquisition of Wyeth and Merck’s merger with
Schering-Plough. (Dept. of Finance:2013)
2.6 Risk Frameworks
2.6.1 Introduction
Risk management and contingency planning has been written about for some time with a
body of literature existing from a diverse range of fields (Juttner et. al, 2003,197:210)
This broad application is seen throughout frameworks and literature outlined in this section
of the research. Narasimhan & Talluri (2009:114) have argued that SCRM “can be viewed as
a strategic management activity in firms given that it can affect operational, market and
financial performance of firms.” However to structure this section existing frameworks will

34
be categorised separately under the broad risk categories of Risk Management – Strategic
Risk – Operational Risk – Financial Risk and Hazardous Risk following on from section 2.4.2.
2.6.2 Risk Management Frameworks
2.6.2.1 Risk Management Introduction
Risk management may be defined as as “the process whereby decisions are made to accept
a known or assessed risk and/or the implementations of actions to reduce the consequences
or probability of occurrence.(ISO) Ritchie & Brindley (2007:305) states that risk management
seeks to address all three dimensions of the risk construct (i.e.likelihood of occurrence,
outcome consequences and causal pathways) Generally used actions for risk management
are, for example to avoid, reduce, transfer, share or even take the risk.” Categorisation
of supply chain risk and risk management (Mykytyn et. al (1999:437:445) report that key
components of risk management Include (1) risk identification; (2) risk analysis; (3) risk
reduction, transfer, and acceptance; (4) risk monitoring
Figure 15:Enterprise Wide Risk Management
Source: Deloach, J. and Temple, N.(2000)
Risk management is broadly defined under the family of standards of ISO 31000. These
generic guidelines state the following;
1. Avoiding the risk by deciding not to start or continue with the activity that gives rise to
the risk
2. Accepting or increasing the risk in order to pursue an opportunity
3. Removing the risk source
4. Changing the likelihood
5. Changing the consequences
6. Sharing the risk with another party or parties (including contracts and risk ﬁnancing)
7. Retaining the risk by informed decision

35
Figure 16: ISO 31000 Risk Management Series
Source: International Organization for Standardization (ISO)
Available at: http://www.iso.org/iso/home/standards/iso31000.htm
2.6.3 Strategic Risk Frameworks
Strategy is the essential fabric to running a successful organisation. Mintzberg (1985:257-
272) has analysed strategies over time making the distinction between intended strategy
(plan before action) and realised strategy (learned as events unfold). Emergent strategies
are particularly important as vision and mission are dynamic to a varying degree as external
factors and changing conditions shed new light on strategic plans and ultimately risk over
time. Thompson et al. (2008:4) states that “the strategic choice a company makes are
seldom easy decisions and some may turn out to be wrong - but that is not an excuse for
not deciding on a concrete course of action.” In this section a literature review of strategy
was conducted, this progresses this section whereby an initial calculator that Simmons fig 17
describes a further investigation into this section finishes with a strategic map which was
produced by Drzik & Slywotzky (2005) as outlined in the Harvard Business Review.

36
2.6.3.2 Evolving nature of strategy in manufacturing environment (Literature Analysis)
Underpinning
Business
Strategy
ExaminingManufacturingand
Strategytogether
Examining
NPDand
Strategy
Examiningand
focusshifttoNSD
andservice
Strategy

37
2.6.3.3 Strategic Risk Calculator
Kaplan and Norton’s balanced score card (BSC: 2002) has set the tone in terms of strategic
performance metrics but strategic risk factors are not well represented in literature.
Simmons (1999:7) has developed a strategic risk tool which calculates important strategic
topics such as culture as outlined below.
Robert Simmons (1999:7) has written about the strategic impact of risk on an organisation.
Strategic Risk assessment entail asking questions which are generic such as;
1. How likely (probable) is it that an event will occur?
2. What is the significance of the consequences and losses?
Simmons has developed a tool entitled “risk exposure calculator” which calculates the
scoring out of 3 broad areas of: Growth, Culture and Information Management with 9
subject categories in total each scored out of 1 -5 scoring
These added together will give results of how organisations fare when it comes to strategic
risk;
Safety Zone (9-20) Probably safe from unexpected errors or events that could jeopardise
health of business. This state may be too low risk.
 The Caution Zone (21-34) Most companies in this bracket but should be alerted to
high scores in any two out of three dimensions.
 The Danger Zone (35-45) this is an overall risky and need to control risk.
Figure 17: Strategic Risk Calculator
Source: Simmons, R. (1999) How Risky is your company. Harvard Business Review. P87.
Growth Culture Information Management
Presures for
Performance
Rewards for
Entrepreneurial
risk taking
Transaction Complexity and
velocity
Rate of
expansion
Executive
resistance to
bad news
Gaps in diagnostic
performance measures
Inexperience of
key employees
Level of internal
competition
Degree of decentralised
decision making

38
2.6.3.4 Strategic Risk Map of Hypothetical manufacturing and service firm
Figure 18: Strategic Risk Map
Source: Drzik,J. & Slywotzky A.(2005) Countering the biggest risk of all. Harvard Business Review. P83.

39
2.6.4 Operational Risk Frameworks
2.6.4.1 Supply Chain Risk
Risk in the supply chain (SCR) and the management of supply chain risk (SCRM) is defined as
“the variation in the distribution of possible supply chain outcomes, their likelihoods, and
their subjective values” (Juttner et al., 2003 197:210) Kleindorfer and Saad (2005,63:68)
state that some of the drivers of SCRM includes “corporate image, liability, employee health
and safety, cost reduction, regulatory compliance, community and customer relations, and
product improvement”. The subject of SCR has received attention in the academic
literature with a general focus on the topics of vulnerability and uncertainty under the
broader context of SCRM from literature such as Harland, Brenchley, & Walker, (2003) and
Christopher, M. (1998).
Vulnerability has been defined as the “existence of random disturbances that lead to
deviations in the supply chain from normal, expected or planned activities, all of which
cause negative effects or consequences” (Svensson, 2000). Ritchie & Brindley (2007:306)
states that “uncertainty relates to the situation in which there is a total absence of
information or awareness of a potential event occurrence, irrespective of whether the
outcome is positive or negative”.
The literature has furthermore leaned towards the disruptive element in supply chains and
subsequently the examination of the resilience and robustness that is needed for supply
chains as the following authors have concentrated research focus;
Disruption in
the supply
chain
Wildgoose, N.,
Brennan, P. and
Thompson, S.
(2012.)
Hu, X., Gurnani,
H. and Wang, L.
(2013)
Chopra, S.,
Reinhardt, G.
and Mohan, U.
(2007),
Tang, C.S.,
2006a
Resilience in
supply chain
Sheffi (2005) Christopher and
Peck (2004)
Tang (2006)b
Table 3: Disruption and Resilience Literature
The area of disruption (terrorist attack 911, earthquake, foot and mouth etc.) along the
supply chain has been examined extensively, this humanitarian and logistics focus relate and
link directly back to hazardous risks. Resilience or the ability to bounce ties into the

40
disruption element as many supply chains will encounter disruption but not all will be
resilient and learn to cope with the uncertainty.
2.6.4.2 Supply Chain Risk Classification and Supplier Risk Management
As seen in fig 19 classification of supply chain risk which looks at supply, process, demand
and control was provided by Christopher and Peck. This framework tries to map exactly the
extent to which supply chain risk fall within to be classified as SCR. SRM or supplier risk
management has been described in fig 20 as a framework proposed by Matook et al. (2009)
which gives a basic process description of supplier risk management of a manufacturing’s
short term and/or long term supply needs. Zhang describes in fig 21 the typical
pharmaceutical supply chain.
Figure 19: Supply chain risk classification
Source: (Christopher and Peck, 2004)
Figure 20: Supplier Risk Management Framework
Source: (Matook et al., 2009)
Figure 21: Typical Pharmaceutical Supply Chain
Source: (Zhang and Tan, 2008:237)

41
2.6.4.3 Supply Risk
Current business trends are leading to complex, dynamic supply networks. One
consequence is that risk is increasing, and shifting around supply networks. (Harland et al.
2003, 51:62) There are many supply chain risk factors as outlined by Chopra and Sodhi
(2004) such as “as disruptions, delays, systems, forecast, intellectual property, procurement,
receivables, inventory and capacity.” A sample supply network framework was developed
by Harland et al. (2003) which tries to bring together known elements of risk frameworks
and simplify the processes into six phases.
i. Map supply network - who owns the risk, key measures and structures in place
ii. Identify risk in its current location - strategic risk, operations risk and the potential
loss to any of the stakeholders
iii. Assess risk - likelihood of the risk, triggers and likelihood of loss
iv. Managing risk – analysis of the risk from the information gathered
v. Form collaborative supply network risk strategy – Possibility of redesign of strategy
with aid and collaboration from the supply within the network
vi. Implement supply network risk strategy - Tie all process steps together and
determine the strategy to successfully many the supply network.
Figure 22: Supply Netword Risk Tool.
Source: Harland et al. (2003)

42
2.6.4.4 Sourcing Risk
Literature has suggested that in order to buffer against supply uncertainty risk organisations
much employ strategies such as capacity, inventory and time buffers in order to ensure
business survival and on time delivery to all of its customers. (Zsidisin et al., 1999; Stecke
and Kumar, 2009 193:226) This approach is important as supply of raw materials and
ingredients is an important factor in the life science sector.
The Kraljic matrix named after Dr. Peter Kraljic and the later adaption by Van Weele provide
the most commonly practiced purchasing analysis tools. It links the importance of risk of an
item to an appropriate sourcing strategy risk. Cheverton, P. & Velde, J. (2011) state that the
“model is meant to generate insights, not to serve as a numerically accurate graph.”
Figure 23: Kraljic matric with sourcing strategies
Source: Cheverton, P. & Velde, J. (2011) Understanding the Professional Buyer. USA: Kogan Page

43
Figure 24: Kraljic matrix with procurement management attributes
Source: Cheverton, P. & Velde, J. (2011) Understanding the Professional Buyer. USA: Kogan Page
2.6.4.5 Supply Risk Management Frameworks in Action
Ericsson as mentioned in this thesis is an example of how an organisation which is reactive
and naïve in the area of supplier risk and supply chain risk management can suffer to the
point of a complete halt in production. The consequences of the fire at Albuquerque were
extremely sever to the point that Ericsson’s production ceased making mobile phones, it
chose to forge a collaborative arrangement with Sony to supply phones to form the joint
brand of - Sony Ericsson to directly compete with Nokia. This relationship lasted over ten
years from 2001 up to 2012. (Zdnet: 2011) As a result of the incident at the Albuquerque
plant new procedures were introduced at Ericsson to learn from their mistakes. Insurers
were quite reluctant to insure Ericsson after the incident in which $200m was paid out.
(Norrman, 2004: 434-456)

44
In Fig 25, Ericsson implemented new procedures and processes to rectify their poor risk
management as bore witness in the plant in Albuquerque. (Norrman et. al 2004) This risk
supply chain risk management evaluation was tested out subsequent to the supplier
incident. In having procedures and documented steps as in fig 25 and fig 26 roles,
responsibilities and ownership could be determined and the situation addressed in the
correct manner.
Figure 25: Erickson Risk Managment
Source: Norrman et. al 2004
Figure 26: Erickson Supplier Visability
Source: Norrman et. al 2004

45
2.6.4.6 Practitioner Supplier Risk Frameworks
The term SRM has become to be known as supplier relationship management and used in
organisation to ensure value engagement while working in a collaborative manner to ensure
competitive advantage. Supplier risk is a burgeoning area of operations and procurement
and many practitioners in this field have realised that this area is critical as seen in fig 27 and
fig 28. This practitioner literature appears to have place a greater importance than academic
literature with regards to adoption of supplier risk and how this integrates with all the
stakeholders within a business.
Figure 27: Supplier Risk Management interactions with internal and external functions
Source: Deloite, 2012
Figure 28: Supplier Risk Framework
Source: Deloite, 2012

46
2.6.5 Financial Risk Frameworks
2.6.5.1 Finance Interlinked to Supply Chain
Supply chain management mantra is concerned with “adding value” at every possible stage
across the organisation. This is sometimes hard to quantify given to the fact that monetary
savings can be more readily quantified and so it could be reasonable to assume that
qualitative metrics can be undermined as a result. CAPM or capital asset pricing model tries
to establish a relationship between financial performance and share price through
systematic risk (cannot be avoided – macro events/political) and unsystematic risk
(company specific). This CAPM is part of Portfolio Theory and ties into the fact that
shareholder value and stock price losses have not been measured in-depth in relation to the
supply chain correlation. As outlined in Hendricks & Singhal (2003, 501:522) glitches in the
supply chain can;
i. lead to short-term and long-term net cash flow problems
ii. customer problems when demand and supply are affected by glitches
iii. all can lead to poor reception, dissatisfaction, lack of loyalty and poor word of mouth
publicity
Hendricks & Singhal have demonstrably shown that glitches in the supply chain have had
real time effects on stock price, this has been furthermore shown in fig 29 and fig 30 where
the drop in stock price has been attributed to strategic decisions closely followed by
operational type risks. This has been quantified by Deloitte and Touche whereby research of
the top 1000 global companies from 1994 to 2003 found that the top 100 events that
accounted for the most value lost were strategic events at 66 of the total number of
incidents. (Deloitte Development LLC: 2005)
Figure 29: Linking supply chain performance to shareholder value.
Source: Hendricks & Singhal (2003, 501:522)

47
Figure 30:Primary causes for drop in stock price (number of companies).
2.6.6 Hazard Risk Frameworks
Disasters and disruptions can occur due to unpredictability and unknown risks in
macroeconomics changes or indeed natural disasters as shown with the car shortage due to
the Japanese Tsunami. This type of disruption as written in supply chain can affect all the
business and thus all risks should be viewed in unison as much as possible. Types of
frameworks that exist are sparse.
2.6.6.2 Business Continuity Planning Framework
An example of a well-used model is that of Business Continuity Planning (BCP) as seen in fig
31 looks at as Elliot et al. 1999 states “identifying an organization's exposure to internal and
external threats and synthesizes hard and soft assets to provide effective prevention and
recovery for the organization, while maintaining competitive advantage and value system
integrity.”

48
Figure 31: Business Continuity Plan
Source: “Ready US -” National public service advertising (PSA)
Available at: http://www.ready.gov/business/implementation/continuity
2.6.6.3 Catastrophic Risk Management Framework
In addition to this widely used model a framework was designed based on the generic risk
matrix of probability vs impact by Knemeyer et al. (2009,141:153) as seen in fig 32 which
applies a descriptor for a catastrophic event and the mitigation strategies that management
could employ as a result.
Figure 32: Catastrophic risk management matrix
Source: Knemeyer, A., Zinn, W., & Eroglu, C. (2009). Proactive planning for catastrophic events in supply chains
Journal of Operations Management, 27 (2), 141-153

49
2.7 Gap Analysis of Frameworks and Literature
2.7.1 Introduction
In analysing current literature and frameworks available in risk and supply risk from
practitioners and academics alike it appears that a body of literature on risk does exist but it
is represented in many shapes and forms. There is an array of generic models that exist
examples of which are the ISO, enterprise risk management (ERM) and business continuity
planning (BCP). Supply risk has models such as Krallic and basic economic principles such as
Pareto and ABC analysis which are used for assessment of strategic sourcing in supply chain
and more distinctly procurement.
2.7.2 Lack of measurement and broad characteristics
The strategies and frameworks that have been portrayed in the framework section of the
literature review can be found in many text books and disciplines such as project
management, operations, supply chain and strategy. The application, adaption and
interpretation therefore is incumbent upon the reader without measurement scales, which
means the effectiveness of such frameworks is only as good as the sophistication of the
organisation. Chen and Paulraj (2004: 136) have stated “the scientific development of a
coherent supply chain management discipline requires that advances be made in the
development of measurement instruments.”
2.7.3 Tendency to view Supply Chain Risk in Isolation
Emphasis and importance in academic literature has been placed on supply chain
disruption, resilience and robustness management with Sheffi, Chopra, Tang, Christopher,
Kleindorfer & Saad the main contributors to this area. Risk needs to be considered in a more
holistic way. Furthermore disruption frameworks only offer static approaches which refer to
high level details to mitigate the negative impact of disruptions, as Hendricks & Singhal 2003
states “although there is much discussion in both the academic and the practitioner
literature on strategies that firms can use to reduce the frequency or mitigate the negative
impact of disruptions, there is little rigorous empirical evidence to support the effectiveness
of these strategies”. This is reiterated by Adhitya et al. (2009) “the existing literature does
not provide a way to systematically identify risks”

50
The problem with such an approach and as outlined in this chapter is that the categories of
risk such as strategic, operations, financial and hazard risks are interlinked and supply chain
is intertwined amongst all these disciplines. Isolating supplier risk and supply chain risk
without integration into strategic and financial occurrences can dilute the importance of SCR
and SCRM. Therefore it is valuable that all stakeholders within an organisation have
adequate knowledge of risk and not isolate risk solely to the supply chain, operations or
procurement department.
2.7.4 Conclusion
A problem lies within the application of risk as generic broad sweeping analysis and
frameworks currently preoccupy literature. The lack of focus on specific industry metrics
and criteria analysis dilute the context to which the risk model was created. The differences
in approach and application of frameworks whereby regulation is stringent will be vastly
different to organisation who do not face this challenge increased prioritisation and
effective risk analysis is required in such circumstances.
Furthermore, the application of such a generic risk approach neglects to understand that a
supplier can contribute to not only supply issues but to broader issues such as bad press
which in turn turns an operations type risk into a strategic risk and ultimately to a financial
risk. Hendricks & Singhal (2003, 501:522) have documented the correlation of stock price
for both supply chain glitches and the effect of supply chain disruptions on long-run stock
price performance and equity risk of an organisation. This highlights the interconnected
nature of risk and as a topic which must be understood in all departments.
The importance of bottom line figures as a direct correlation to SCRM holds weight in
analysing the importance of risk frameworks especially in the supply chain. Supply chain and
risk performance is essential in assigning a strong case for the advancement of a greater
strategic, financial, operational and hazardous risk framework or frameworks to be
furthered developed and scrutinised in time to come. For now, there appears to be a deficit
in literature that supports consistent and comprehensive approaches in this field of
research.

51
3 Research Methodology
3.1 Introduction
The following chapter demonstrates the research methods used in the development of this
research paper. The research was conducted to contextualise and give meaning to the
research.
The areas that will be assessed in this chapter of the research follows the following process;
 The research problem statement
 The importance and justification for carrying out the research
 The objectives set out to be answered
 The research philosophy , choice and strategy
 The participants for the research, the structure of the approach and data collection
3.2 Research Problem Statement
In reviewing the literature for risk it has been found that gaps lie in;
1. Sector specific risk frameworks that can be applied to organisations
2. Risk and how it has affects each department either directly or indirectly throughout
the organisation
3. The importance of SCM and SRM to the organisation and stakeholders
The potential to protect sectors through development of frameworks that view risk
categories and supplier /supply chain risk is critical to help protect sectors from potential
losses. The literature review has pointed to the fact that broad abstract approaches have
been commonplace in academic literature with no demarcation for sector specific focus.
This disparate approach has meant that there is a lack of sector specific frameworks leading
to little uptake with fragmented approaches. Two fundamentals areas that this research
addresses are the following;
 Gap Analysis – the aim of this analysis contained within the literature review
determined the premise for the research and aided in identification of the lack of
sector specific risk frameworks
 Risk knowledge – the aim of the case study and sector survey is to further
contextualise and understand how risk is perceived in the life science and
understand risk as much as we can do so going forward.

52
3.3 Importance and justification of Topic
The importance and justification of this research in the life science sector;
1. It is critically important to Ireland in that it effects Ireland’s economy and Gross
Domestic Product. It employs a large workforce directly and indirectly throughout
the country. This dependency on the sector could be taken for granted and could
change due to enforced changes on the Irish corporate tax rates which at present are
extremely attractive.
2. A skills deficit or a non-attractive climate for graduates in third level could open up a
shortage of candidates and push organisations out of Ireland because human and
tacit knowledge diminishes and decreases.
3. A non-consistent and abstract understanding of risk, risk frameworks and risk
strategies across organisations mean a reactive approach
4. The understanding of strategies and frameworks that could mitigate supplier risk is
quite low
5. The role of agencies such as the IDA and EI and others throughout Ireland need to be
focused on embedding organisations in Ireland but also to understand indigenous
companies in the supply chain.
6. Smaller indigenous suppliers and organisations need appropriate knowledge of risk
as much as large multinationals when risk can affect each other directly.
3.3.1 Trend in Risk Literature
The topic and trend within the area of risk has shown that whilst the area of risk has
increased in the literature it has not increased significantly in the social sciences and supply
chain disciplines. Risk is well represented in the academic literature as shown in a scopus
search of all literature conducted on the 2nd July the term “risk” resulting in 2,418,304 from
1980 – 2013. The trend shows that risk literature is increasing in terms of volume year on
year see fig 33.
Caution must be applied in these figures as the literature is predominated by risk in
Medicine and other discipline, social science lags behind receiving a paltry 3.4 percent of
overall attention in the area as delineated in fig 34. Supply chain risk is diluted even further
within this search as the term “supply chain” was searched within the results whereby a

53
total of 12,258 documents were found. Interestingly the results showed that there is no
one predominant industry sector focus whereby engineering, business, medicine, computer
science, environmental science and to a lesser degree agriculture have recognised the
broader implications of supply chain and risk.
Figure: 33 Risk litterature Search; 1980-2013:
Source: Sopus (2014)
Figure 34: Risk litterature by discipline; 1980-2013:
Source: Sopus (2014)

54
3.4 Objectives
The objectives of this research were the following;
Objective 1
To assess and examine current knowledge in risk and risk categories
comparing departments of organisations within the life science sector.
Objective 2
To understand what supplier risks are prioritised and deemed important
to the organisation and to investigate supplier risks and issues which
have taken place resulting in increased risk and supplier risk appreciation
and awareness.
Objective 3
The examination and sophistication level of organisations in relation to
risk and the level at which risks are perceived to be treated in the
operations of the organisation.
Objective 4
The noticed effects of the patent cliff either directly or indirectly to the
sector as wells as the sole reliance of Irish organisations
3.5 Research Philosophy
Research has been described as the “systematic, controlled, empirical, and critical
investigation of natural phenomenon guided by theory and hypotheses about the presumed
relationship among such phenomena” (Kerlinger, 1973) There are many definitions that
exist but other definitions express the term research as with a process and development of
new knowledge being at the core. (Berg and Latin, 2008:4) These processes will now be
investigated in a logical format to address all the relevant parts of research and to gain new
knowledge in the research area.
The research philosophy is important in determining the approach and method used in
analysing and interpreting research results. Philosophy by definition is derived from the

55
Greek “philosophia” meaning the love of wisdom and to truly adopt and apply this wisdom
to the research a holistic view of all known concepts examining pros and cons was
established. A number of considerations are needed in the design of the research. The
research onion (Saunders et. al 2009) is a commonly used graphic to show the dynamics of
research methods and the varying options. As the graphic delineates the research
philosophy is the outer most layer of the onion and this shows the four pillars of research
philosophy;
 Positivism – As Saunders et al. (2009) states this philosophy represents a natural
scientist view of research only phenomena that you can observe will lead to the
production of credible data.
 Realism – This view of research philosophy is of scientific enquiry and that there is a
reality quite independent of the mind. Realism can be split into two contrasting
views;
1. Direct Realism – What you see is what you get, what we experience through
senses in accurate.
2. Critical Realism - What we experience is in fact sensations ie. Our senses
deceive us. (Saunders et. al 2009)
 Interpretivism – is as Collins (2010: 92) states that interpretivism takes the view that
truth is constructed through the understanding of the meanings that individuals
apply to the phenomena in a socially constructed world. This approach is used
qualitatively and uses an inductive approach.
 Pragmatism – as the dictionary (Merriam Webster) states is a reasonable and logical
way of doing things or of thinking about problems that is based on dealing with
specific situations instead of on ideas and theories. This philosophy as Collins (2010)
states has given rise to game theory, negotiated order theory, labelling theory and
grounded theory.
3.5.1 Qualitative and Quantitative
Murray (2003) in his book “Blending qualitative and Quantitative Research Methods in
Theses and Dissertations”. cites that the easiest way to distinguish between quantitative
and qualitative may be to say that qualitative methods involves a researcher describing
kinds of characteristics of people and events without comparing events in terms of

56
measurements or amounts. Quantitative measures as Murray goes on to describe are
concerned with and focus on the attention of measurement and amounts (more and less,
larger and smaller, often and seldom, similar and different) of the characteristics by the
people and events that the researcher studies.
Quantitative measures are often times statistical in approach and involve the use of
scientific enquiry as such it takes on a positivist approach where observations can be viewed
and analysed. Qualitative measures view the world as a social construct which is more
complex than just quantitative analysis is largely the interpretivist view.
Figure 35: The Research Onion
Source: Saunders et. al (2009)
3.6 Research Choice
The choice of research is important in deciding how to achieve the goals, aims and
objectives of the research. All research has its own validity and benefits. As we can see in fig
35, case studies have been increasing in usage across the social sciences. Surveys have been
used as the graphic delineates in great volumes, such is the uptake on surveys because of
the relative ease to construct and administer, time efficiencies and coding for SPSS and
other style statistical research programs are easily addresses with this type of research. As

57
Collins, 2010 claims that in sampling there is no one correct choice of data or technique for
data collection. A multifaceted approach to this research was chosen and approached by the
researcher. As this research is concerned with examining the adequacy of supplier risk
across organisations it was imperative to analyse the sector as a unit to get an
understanding of deficiencies and commonalities. In order to comprehensively and
systematically conduct research on the sample market an online survey was conducted
which was distributed via email. The second approach was to analyse one pharmaceutical
company which is heavily involved in manufacturing.
Figure 36: Frequency of Four Methodoligical Terms appearing in Published Books 1980-2008
Source: Yin case study researh 2014:20)
3.7 Deductive or Inductive
Collins 2010, has described a comparative view of deductive and inductive approaches that
could be undertaken in a sample research project
Deductive approach Inductive approach
Start with a proposition
Research a population
Design a questionnaire
Administer questionnaire
Focus group
Perceptions and feelings
Literature review
Semi structured interviews
Table 4: Deductive or Inductive adapted from Collins

58
The research conducted in this study is of a deductive approach.
Mixed methods were judged by the researcher to be the best approach whereby a
understanding qualitative portion and quantitative numbers view could be analysed
together to get a comprehensive view of the sector.
3.8 Defining features of Case Study approach
As Creswell states a case study defines the following features;
1. Case study research begins with the identification of a specific case. The key here is
to define a case that can be bounded.
2. The intent of conducting a case study is important. The intent may be to understand
a specific issue.
3. A hallmark of the case study of a good qualitative is that it presents in –depth
understanding of the case.
4. The selection of how to approach the data collection will be different. Either multiple
cases or single cases can be used by the researcher.
5. The key to understanding analysis is that a good case study
Investigates the themes or issues and may be ordered into a chronological order.
6. Case studies often end with conclusions.
3.8.1 Weaknesses of Case Study approach
Qualitative research has been criticised in literature as (Kerlinger 1986:348)] identifies three
major weaknesses of qualitative research: (1) the inability to manipulate independent
variables, (2) the risk of improper interpretation, and (3) the lack of power to
randomise. There appears to be four problems with case study research as pointed out by
Lee (1989) a lack of: Controllability, Deductibility, Repeatability and Generalizability. The
lack of randomisations has meant that repeatability and generalisation is low.
3.8.2 Benefits of Case Study approach
The benefits to case study approach for a portion of this research is that the respondents
have been targeted and chosen in a precise and targeted manner. This information oriented
sampling aids in understanding the core issues of this organisation and consistent traits that
may exist. The case study is chosen as part of this research as the targeted organisation has

59
many suppliers as it is a manufacturer of pharmaceutical drugs. This means the results could
be translated to other fields of manufacturing as the process is the same as the food
industry.
3.9 Research Strategy
To fully understand the research question posed there needs to be a strategy set out prior
to commencement to determine the approach for each process step in the research. A
simple process flow chart was created using a process flow chart in excel below see figure
37 to define what aspects would be carried out for the purpose of this research. This flow
was adapted from the works of Wellman and Kruger; 1999. This aided in logically planning
how to conduct individual parts of the research and how the process would be structured.
Preliminary Data Gathering – For the purpose of the research report a preliminary
literature review was conducted to gain a better grounding in the subject area of risk.
This helped in approaching the gaps in literature and an insight into frameworks from
the offset.
Problem Definition and Theoretical framework – The problem definition and
subsequent theoretical framework was attained by initial exploratory review of the
literature combined with talks from industry in the area of risk.

60
Data collection and analysis interpretation & Scientific Research design – (Research
design elements) – The main portion of this report lay in this research section in
examining and designing the research, the variables were identified in order to deduce
whether the hypothesis objectives and research question are sustained and validated.
Figure 37: Research Strategy
Source: Researcher’s AdaptIon from Wellman and Kruger; 1999
This research strategy focused on a deductive style approach. Consisting of three phases;
Phase 1:
The literature review was conducted to find cracks, weaknesses and deficiencies. It had
exposed in the literature gaps in risk, supply chain risk and risk frameworks in general. This
review highlighted that the area is a burgeoning trend but that risks are commonplace and
increasing due to many drivers both controllable and uncontrollable. The literature review
helped in establishing a foundation for which the Irish economy is reliant on the sector.
Phase 2:
The strategy that was employed for this phase was to investigate organisations within
pharmaceutical who have characteristics such as a large supplier base and are involved in
manufacturing. An organisation which was initially contacted for research purposes was
based in Galway and was a world player in the manufacture of medical devices. An
appropriate diverse sample could not be collected and senior management involvement
was quite low. However, this first stage aided in refining the questionnaire and focused the
researcher in finding an appropriate organisation with a mix of departments at senior level
for a representation of the organisations understanding of risk.
Phase 3:
To review the sector and to test the implications of the research, the researcher opted to
carry out a sector survey consisting of the very same questions asked in the case study
example. The strategy used here was one in which validity of a single case study would not
mean a replication of results or indeed a creation, adoption of risk frameworks and/or
strategies across the sector but would make a good sample case study as of the senior level
management view.

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