CSL Limited Annual Report 2021/22 24 4 Our Material Risks CSL operates in a fast paced and constantly evolving environment of science, technology and healthcare. We are exposed to risks inherent in the global biotechnology industry, and in particular the plasma therapies and vaccine industries, which include research and development, intellectual property and clinical trials. We are also exposed more broadly to external risks such as the COVID-19 pandemic and the Russia-Ukraine conflict and we regularly review our group risk profile to proactively identify material business risks and opportunities and assess external risks that could affect our global operations. Managing risks includes both the mitigation of disruptive risks and the preparation for seizing opportunities. Our global Enterprise Risk Management Framework is designed to ensure robust risk oversight that is fit-for-purpose for both the operation of our business and to support our strategy and deliver on our commitments to patients and public health. As part of our enterprise risk management process, the Board and management team have identified the key risks that are material to CSL. These material group risks are described below along with an explanation of our approach to managing them in the context of delivering on our 2030 Strategy. Key financial risks are set out in Note 11 to the Financial Statements. There are other risks that are inherent in the vaccine, pharmaceutical and plasma therapies industries, besides those detailed below or in the Financial Statements, that could also adversely affect CSL’s business and operations. Patient safety and product quality Patient safety is paramount for CSL’s ongoing sustainability as a global biotechnology leader and our long-term strategy of efficiency and reliable supply. When we talk about patient safety, we mean both in the use and administration of registered products as well as in the conduct of our clinical trials. While it is inherent in our industry that patients and trial participants may experience adverse reactions to therapies, CSL’s manufacturing, product quality assurance and pharmacovigilance practices serve to ensure the highest standards of safety and the preservation of our reputational integrity. Our processes and procedures meet good pharmacovigilance practice (GPV) and good clinical practice (GCP) standards we seek to ensure that product information is up-to-date and contains all relevant information to assist healthcare practitioners to appropriately prescribe CSL products. For clinical trials, participants are informed and acknowledge awareness of the benefits and risks of participation in the trial through use of Informed Consent Forms approved by regulators. In terms of meeting product quality requirements through our manufacturing and supply, we adopt and comply with a broad suite of internationally recognised standards through the CSL Quality Management System, including good manufacturing practice (GMP), good distribution practice (GDP) and audits of third-party vendors and suppliers. We are frequently inspected by independent regulatory authorities auditing compliance with these standards. Product innovation and competition We recognise that an impediment to delivering on our innovation and sustainable growth strategies is the changing competitive landscape for new technologies and disruptive therapies, such as cell and gene therapies. This material risk may alter the economics and characteristics of, and the demand for, CSL’s plasma and adjacent therapies, and may also affect our platforms and capabilities in plasma fractionation, recombinant technology, and cell and gene therapy. We strategically review our existing and future product pipeline against market demand and continually evaluate our competitive landscape. A key part of our strategy includes diversity in our product pipeline, and focus on six therapeutic areas (immunology, haematology, respiratory, cardiovascular and metabolic, transplant, and influenza vaccines). We incorporate product lifecycle development and management, as well as development of new therapies, in strategies for each therapeutic area. In addition to proprietary research, CSL’s competitive approach includes licensing, acquiring or partnering with third parties to remain competitive and advance growth within our chosen therapeutic areas. With respect to continued growth and innovation in the competitive global influenza vaccine market, we recognise the need to continue leading in the development and manufacture of influenza vaccines including cell-culture technology and investigating the use of self-amplifying mRNA technology. Failure to capitalise on innovative technology will diminish growth in this product sector, whereas success will deliver competitive advantages. Supply, capacity and operations Having a sustainable and reliable supply chain is critical to the success of our 2030 Strategy, particularly to achieving consistent, economical and efficient supply. When considering this material risk, we constantly monitor the demand for and supply of collecting and acquiring human plasma. We also monitor the scalability of specialised companies who supply rawmaterials, software and bespoke manufacturing equipment to match our business demand and growth objectives. Both plasma collection and rawmaterial supply across our businesses have been impacted by COVID-19, requiring us to implement both immediate and continued risk mitigations to manage this risk. Similarly, with the ongoing Russia Ukraine conflict, the EU energy crisis continues to escalate. Higher gas prices could affect all our sites and suppliers, while gas supply constraints will mostly affect our EU operations. Several mitigation actions have been identified and contingency plans established to help prevent disruption to our operations however the situation will continue to be monitored as the conflict continues.
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