CSL Ltd Annual Report 2019

Description of Key Risk Key Risk Mitigation Manufacturing Operations • The manufacture of CSL’s products in accordance with regulatory requirements entails complex processes. Any challenges experienced in the continuity of this process, and/or the quality of supply, could have a negative impact on business results. • CSL’s manufacturing processes utilise specialised equipment that, if damaged or experiencing malfunction, may require considerable time and cost to replace which can lead to a possible interruption of production and other operations. • CSL has a robust management process and strategy to support the continuity of manufacturing and supply. This includes adoption of, and compliance with, a broad suite of internationally recognised standards (GxP) including Good Manufacturing Practice (GMP). • CSL has a robust preventative maintenance program and access to remedial maintenance, when necessary. CSL also maintains a stock of unique parts and equipment, as well as strong relationships with critical equipment suppliers and fabricators in order to assure expedition of repairs and replacement equipment. Competitive Pressures • CSL faces competition from pharmaceutical and biotechnology companies. The introduction of new competitive products or follow-on biologics by competitors may result in reduced product sales and lower prices. In addition, industry-wide shifts in demand for CSL products may affect business and operations. • Along with regular reviews of key markets and geographies of strategic value and potential, CSL monitors its competitive markets to understand what new competitive products are emerging and the ongoing demand for CSL products. CSL has a diverse product pipeline that incorporates product lifecycle development, and seeks to ensure pricing of products remains competitive. Corporate Transformation • Potential business combinations could require significant management attention and prove difficult to integrate with CSL’s business. • CSL may not realise the anticipated benefits, or it may take longer to do so than anticipated, from any business combination undertaken in the future and any benefits realised may not justify the acquisition price. • Accessing fast-growing or strategic markets and executing on value-creating business development deals are key growth opportunities for CSL. If these activities are unsuccessful, CSL’s business and financial performance could be adversely affected. • CSL takes a disciplined approach to acquisitions. CSL focuses on strategically aligned opportunities, including those where it can derive synergies through its substantial existing knowledge and expertise. CSL also seeks to ensure that a detailed review and assessment of potential business combinations occurs prior to any acquisition. • CSL seeks to ensure that integration activities are well planned and executed, leveraging existing capabilities and knowledge base, as well as those of highly qualified and reputable advisors. • CSL identifies and assesses new business development and market expansion opportunities that align with long term strategic objectives. CSL will engage a broad cross section of functions during the due diligence phase to test the evaluation, integration and operational business continuity should CSL enter fast-growing strategic markets or make an acquisition. Business Integrity • CSL’s marketplace is diverse and complex, presenting many opportunities and challenges. Breach of regulations, local or international law, or industry codes of conduct, may subject CSL to financial penalty and reputational damage. Such instances may invite further regulation that may negatively affect CSL’s ability to market therapies. • CSL operates in many countries and changes in the regulatory framework under which it operates in these countries could present challenges to business and operations. Healthcare industry regulations address many aspects of the business including, but not limited to, clinical trials, product registration, manufacturing, logistics, pharmacovigilance, reimbursement and pricing. • CSL seeks to ensure its employees, contractors and suppliers are aware of CSL’s expectations in relation to their interaction with stakeholders. CSL undertakes relevant training and monitoring of the Code of Responsible Business Practice. CSL undertakes internal audits of functions, processes and activities across its operating geographies. • CSL works to understand the current and emerging regulatory environment to be able tomeet requirements and also engages with government bodies to present constructive views and information regarding the regulatory policy framework. Supply Chain • CSL depends on a limited group of companies that supply raw materials, and supply and maintain equipment. If there is a material interruption to the supply or quality of a critical raw material or finished product, this could disrupt production or commercial operations. • CSL seeks to maintain appropriate levels of inventory and safety stock and seeks to ensure that, where practicable, alternative supply arrangements are in place. CSL undertakes quality audits of suppliers and maintains and reviews business continuity plans which can be actioned in the event of any significant event. Plasma • CSL depends on plasma donors for the supply of plasma. Ineffective management of donors has the potential to impact supply and may also have reputational consequences. • CSL responsibly sources plasma from donors, complying with voluntary and regulatory standards. The comfort, health and safety of donors is closely monitored. CSL Limited Annual Report 2019 53