Risks in 2021

Our risk portfolio covers 20 risks. Of these, seven are categorized as strategic, nine as operational, and the remaining four as emerging. In addition, we have identified four awareness topics.

Overall, our 2021 risk portfolio is broadly consistent with the previous year. “Sandoz business transformation” was added as a new strategic risk in 2021, reflecting the increasingly competitive environment for generic medicines. Additionally, “facility and workplace safety” was renamed “occupational health and workplace safety” in 2021 to incorporate aspects of the post-pandemic working environment – such as employee well-being – that were identified as an emerging risk in 2020.

Risk rating:

Strategic Risks

  • Key products and commercial priorities
    Failure to deliver key commercial priorities and successfully launch new products

  • Pricing, reimbursement and access
    Pricing and reimbursement pressure, including access to healthcare

  • Alliances, acquisitions and divestments
    Failure to identify external business opportunities or realize the expected benefits from our strategic acquisitions or divestments

  • Research and development
    Failure or delay in the research and development of new products or new indications for existing products

  • Sandoz business transformation
    Inability to drive sustainable growth mid-term by pursuing biosimilars and inorganic growth opportunities

  • Environmental, social and governance matters
    Failure to meet increasingly challenging environmental, social and governance expectations

  • Emerging business models
    Missed opportunities in digitalization and emerging business models

Operational Risks

  • Cybersecurity and IT systems
    Cybersecurity breaches and catastrophic loss of IT systems

  • Fragmented IT landscape and ERP/EDM implementation
    Fragmented business processes and unclear data ownership may impact future digital opportunities, including the implementation of the new Enterprise Resource Planning (ERP) system and Enterprise Data Management (EDM) governance

  • Talent management
    Inability to attract, integrate and retain key personnel and qualified individuals

  • Third-party management
    Failure to maintain adequate governance and oversight over third-party relationships, and failure of third parties to meet their contractual, regulatory or other obligations

  • Occupational health and workplace safety
    Failure to ensure the safety of Novartis facilities and operations, and that of our employees and contractors

  • Legal, ethics and compliance
    Challenges in keeping up with legal and regulatory requirements, and evolving societal expectations regarding ethical behavior

  • Manufacturing and product quality
    Inability to ensure proper controls in product development and product manufacturing, and failure to comply with applicable regulations and standards

  • Data privacy
    Noncompliance with personal data protection laws and regulations

  • Supply chain
    Inability to maintain continuity of product supply

Emerging Risks

  • Geo-political and socio-economic threats
    Impact of geo- and socio-political threats and macroeconomic developments

  • Tax laws and developments
    Changes in tax laws or their application

  • Intellectual property
    Expiry, assertion or loss of intellectual property protection

  • Antitrust
    Potential increased antitrust scrutiny of transactions, together with continued close examination of conduct by pharmaceutical companies

Awareness Topics

  • Climate change
    Climate change and increased risk of major natural disasters

  • Changes in disease patterns, antimicrobial resistance and pandemics
    Antimicrobial resistance is a growing threat to public health, closely related to changes in disease patterns including possible future pandemics

  • Falsified medicines
    Impact on patient safety, and reputational and financial harm to Novartis and our products

  • Governance and ethical use of artificial intelligence
    Lack of artificial intelligence governance or ethical lapses in its use may expose Novartis to operational, reputational and regulatory risks