In an uncertain and complex environment, Sanofi has established a risk management framework to create long-term value, foster continuous improvement and innovation, and protect company assets. This framework is compliant with regulations and aligned with sector best practices.
Risk Management Framework
Sanofi’s risk management framework ensures accountability and competence in managing risks across the organization. It supports decision-making processes aligned with risk exposure and ensures effective information exchange with stakeholders. Key governance bodies include the Sanofi Risk Committee, the Risk Management team, and the Risk Management network.
Active and Emerging Risks
Sanofi employs a comprehensive approach to monitor and manage potential threats and opportunities through its risk profile and emerging risk radar. This system captures and evaluates all categories of risks based on their potential impact on the company.
Sanofi categorizes risks into two main types: active risks and emerging risks.
- Active risks are those that may affect the company within a 3-year timeframe. These risks require immediate attention and management to mitigate their potential impact.
- Emerging risks, on the other hand, encompass trends that could present threats or opportunities over a 7-year horizon and beyond. These risks are monitored and addressed proactively to prepare for potential future impacts.
Risk Management Approach
Sanofi’s approach relies on a comprehensive risk assessment process. This process includes risks and emerging risks identification, evaluation and prioritization, risks treatment and for a selection of emerging risks, development of scenarios to understand their potential impact on the company. This methodology allows us to capture all categories of opportunities and threats closely tied to our strategy and inherent to our business.
Risk Identification
Sanofi uses outside-in, top-down and bottom-up approaches to identify both active and emerging risks. The Sanofi Risk Management team conducts biannual prospective surveys based on insights from reliable sources to identify trends, threats, and opportunities in the pharma and biotech industry. The team consolidates risks from the risk management network across business units and functions and conducts interviews with senior managers from key functions.
Risks Evaluation and Prioritization
Risks and emerging risks are assessed based on severity and likelihood. For active risks this evaluation is complemented by assessing the control level for risks and the velocity for emerging risks.
Active risks are then classified into four categories: vigilance, surveillance, watch list, and control adapted. Emerging risks are prioritized by the Executive Committee based on Risk Committee recommendations.
Risk Treatment and Monitoring
Risk leaders design and monitor mitigation plans. The Risk Committee defines the global risk response strategy, which is endorsed by the Executive Committee and communicated to the Audit Committee of the Board of Directors. Progress of mitigation for risks under vigilance is overseen by the Risk Committee and Executive Committee.
Emerging Risks Deep-dive
Scenarios are developed for prioritized emerging risks, identifying signals that they might become active and proposing early response actions.
Examples
An example of active risk is related to Data Ethics & Privacy. Sanofi's handling of personal data is crucial to its relationships with various stakeholders. The Company is committed to responsibly managing personal data, balancing scientific innovation with privacy protection and regulatory compliance. Failure to adhere to data protection laws could result in loss of trust, reputational damage, operational disruptions, legal actions, and fines.
Examples of emerging risks include geopolitical shifts and climate change impacts on health. The Company has implemented strategic task forces and governance structures to manage these risks.
For geopolitical risks, Sanofi’s actions include implementing strategic task forces and governance structures to anticipate and manage geopolitical risks, such as the Russia-Ukraine conflict, tensions in the Asia Pacific region, and decoupling measures by the US, EU, and China. Additionally, Sanofi maintains awareness of evolving geopolitical risks through annual threat maps and monthly newsletters coordinated between Risk Management and Public Affairs.
Regarding climate change impacts on health, Sanofi aims at reducing carbon emissions, supporting climate adaptation for vulnerable communities, and leveraging its portfolio to tackle diseases exacerbated by environmental changes.