Risk management methods and tools in the pharmaceutical and life sciences industries

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Understanding and implementing risk management methods and tools is crucial for the pharmaceutical and life sciences industries in view of the fact that errors in this area can lead to dangers for human life. Since any mistake in any chain of in this industry can lead to serious consequences; the FDA and other regulatory agencies have created a number of risk management methods and tools for these industries.

A few commonly used risk management methodsIn the pharmaceutical and life sciences area, a few commonly used risk management methods and tools for organizing data and using these to help in decision-making include the following:

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A few popular risk management methods and toolsIn the field of pharmaceuticals and life sciences, these can be said to be some of the more popularly used risk management methods and tools:

Failure Mode Effects Analysis (FMEA)FMEA is a popular one among the risk management methods and tools mainly because it provides a methodology for assessing a potential failure mode for the process that goes into the manufacturing of the pharma or life sciences product and helps to analyze their possible impact on the product’s ability to perform to its required standard.

risk-in-pharmaceutical-and-life-sciences-industriesIdentification and establishment of failure modes are taken as the basis for using risk reduction techniques for eliminating, containing, reducing or controlling the possible failures. Since FMEA depends on a deep understanding of the product and the process; its main steps include dissembling complex processes into simpler and comprehensible ones. For this reason, FMEA is considered a potent risk management method and tool.

Failure, Mode, Effects, and Criticality Analysis (FMECA)Extending the concept of FMEA a little farther, the Failure, Mode, Effects, and Criticality Analysis (FMECA) takes into account the added feature of the extent of gravity of the consequences of a fault or failure, along with the possibility of their occurrence, as well as the chance of their detection. While this is the slight extension that the FMECA brings to FMEA; it is similar to it in other respects, namely:

risk-in-pharmaceutical-and-life-sciences-industriesFMECA too, like FMEA, uses identification and establishment of the process specification to identify risks and failures

FMECA too uses the method of breaking down difficult processes to easier ones to enable better understanding of the failures and risks.

Fault Tree Analysis (FTA)Fault Tree Analysis is another of the risk management methods and tools. What this tool does is that it takes up a single fault at a time for analysis, but links the chains that cause the fault. This is why it gets its name, wherein the results of the analysis are represented in a shape of a tree, in which each level of fault is described with possibilities. A sharp and incisive analytical bent of mind is required to create the FTA.

Hazard Analysis and Critical Control Points (HACCP)HACCP is yet another important one among the risk management methods and tools. It takes a systematic and proactive approach in ensuring the following in a product:


It is considered a comprehensive risk management method and tool because it addresses all the issues relating to risk management methods and tools, applying scientific principles and methods for carrying out the following:

risk-in-pharmaceutical-and-life-sciences-industriesControlling of the risk or the negative outcomes of hazard, which could be due to any of these:

Supporting statistical tools
risk-in-pharmaceutical-and-life-sciences-industriesWhile all the risk management methods and tools described above are a snapshot of some of the major ones, a few supporting statistical tools, too, are used to engender quality risk management. These are some of them:



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It is important for organizations to validate their own Excel Spreadsheet Application

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Organizations that validate their Excel spreadsheet applications stay compliant with FDA requirements,avoid 483’s and save two-thirds of the cost and time on validation.

A critical requirement from the FDA is validation of electronic records. These electronic records have to be compliant with the set of FDA Code of Federal Regulations, the 21 CFR Part 11.

The industries in which this is needed are the following:

  • Pharmaceutical
  • Biotech
  • Medical device
  • CRO
  • Life sciences or related FDA-regulated organizations

Being knowledgeable about configuring an organization’s Excel spreadsheet application becomes a key requirement for organizations to not only meet FDA requirements, but avoid 483’s as well.

A word about 21 CFR Part 11

Complying with 21 CFR Part 11 is a quintessential part of validation of Excel spreadsheet application. 21 CFR Part 11 is a set of FDA requirements. The FDA requires compliance with this Part if the kinds of organizations shown above are to be considered as being compliant with their electronic records. These electronic records could be used for a variety of purposes, and hence their genuineness and authenticity is very crucial to ensure that they are the same as paper records.

Validation of Excel spreadsheet application is important because electronic records are prone to various kinds of manipulation. Staying compliant with 21 CFR Part 11 is what validation of Excel spreadsheets essentially means.

Since globally, organizations are graduating to electronic records and phasing paper records out; implementation of electronic records is inevitable. The long-term impact of paper records and the speed of communication make this even more so. It is estimated that when organizations validate Excel spreadsheet applications using appropriate and well-designed validation templates; they save up to two-thirds of the validation time and costs.

What does compliance entail?

The first step to this is configuring the organization’s Excel spreadsheet application as prescribed by the FDA. A risk-based validation approach is the right step, as it reduces and can even eliminate risks.

Coming to the validation of Excel spreadsheet applications, the organization should devise a methodology by which it creates these kinds of documentation into their Excel application:


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What is Emergency Planning and Community Right-to-Know Act (EPCRA)?

The Emergency Planning and Community Right-to-Know Act is a significant milestone in the detection and prevention of hazardous chemicals. The US Congress enacted this law in the wake of the Bhopal disaster in India. It seeks to involve the local community in its efforts.

community-right-to-know-act-epcraThe core aim of the Emergency Planning and Community Right-to-Know Act is to help local communities organize their activities and prepare for chemical emergencies. Because of the nature and consequences of chemical disasters that can have profound consequences for the local community; the Emergency Planning and Community Right-to-Know Act focuses on the reporting aspect.

Involvement of the local communitiesOne of the major requirements of the Emergency Planning and Community Right-to-Know Act is that of industries, which have to report storage, use and release of harmful chemicals to the local bodies, as well as the state and even federal governmental agencies, so that they allow residents to take the necessary steps for the preparing for the emergencies these substances may cause.

Background to the enactment of the Emergency Planning and Community Right-to-Know Act 
community-right-to-know-act-epcraThe Emergency Planning and Community Right-to-Know Act of 1986, which was authorized by Title III of the Superfund Amendments and Reauthorization Act (SARA); is rooted in the Bhopal gas disaster of 1984, which happened thousands of miles away, in distant India. The widespread loss the gas leakage caused to life alerted the US authorities about the dangers of not having laws to regulate the handling of dangerous chemicals and implementing the laws.

Making note of the severe deficiencies in the ways in which a substance as dangerous as methylisocyanate at the Union Carbide plant, which caused the huge loss to life was stored and used; the Environmental Protection Agency (EPA) was determined to prevent such a disaster in the US. The US Congress incorporated several key provisions in the Emergency Planning and Community Right-to-Know Act which make it mandatory for industries to report on the usage and storage of chemicals to the local communities.

The SERC as the ombudsman
community-right-to-know-act-epcraAs a step towards implementation of the EPCRA, each state is required to appoint a State Emergency Response Commission (SERC). The EPCRA requires these SERCs to divide their states into Emergency Planning Districts. Each SERC has to also name a Local Emergency Planning Committee (LEPC) for each of the districts.

The federal, state and local governments, as well as the industry and tribes are now under the ambit of the Emergency Planning and Community Right-to-Know Act. One of its main provisions, the “Community Right to Know” provision states the conditions and means by which to report chemicals and other hazardous substances. The aim of this provision is to heighten the public awareness of and access to information about these substances, their use and their release, in the local community, so that a disaster can be averted. In case a disaster still happens, its fallouts can be contained.

Key provisions of the Emergency Planning and Community Right-to-Know ActThe Emergency Planning and Community Right-to-Know Act has a few important provisions. These are the key provisions:


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OSHA’s standard on Respiratory Protection Safety Management Systems


Respiratory protection safety management system is a need for people who work in areas that require respiratory systems. Such people are exposed to various types of contamination, because of which they will be required to put on protective systems. The aim of OSHA’s standard on Respiratory Protection Safety Management Systems is to set out Quality Systems for respiratory safety management that offer engineering control measures.

OSHA’s standard on Respiratory Protection Safety Management Systems is set out in 29 CFR 1910.134. This standard describes the guidelines aimed at protecting workers who are required to work in hazardous environments. OSHA prescribes a respirator in the event of a person being required to work in conditions in which pollutants that cause respiratory issues are present.

Conditions in which respirators are required
respiratory-protection-safety-management-systemsThese include mists, dust, fog, gases, sprays, vapors, etc. An employer who employs people who work in these conditions is expected to provide respirators to such employees. The employer may either provide these respiratory systems or allow the employee to use one of his own, so long as the product is of satisfactory quality standards. OSHA’s standard on Respiratory Protection Safety Management Systems has a lot of detailed information about all aspects of the respirator. One of the requirements of OSHA’s standard on Respiratory Protection Safety Management Systems is that the respirator should be NIOSH-certified.

OSHA’s standard on Respiratory Protection Safety Management Systems deals with important aspects of a respirator, such as why it is necessary, how to wear one, the respirator’s abilities and limitations, the medical condition of the personnel required to use it, how to clean it, how to repair it, how to recognize situations in which it will not be able to deliver its optimal performance, and so on.

Onus on the employer
respiratory-protection-safety-management-systemsOne of the highlights of OSHA’s standard on Respiratory Protection Safety Management Systems is that it requires the employer to put in place a respiratory protection program. Each employer whose workplace has conditions that are hazardous to the respiratory system has to establish a written document that specifies what kind of respiratory system protection he has put in place at the facility. Procedures that are specific to the facility or workplace have to be described in this program.


A program administrator, who is a qualified person, will be in charge of administering OSHA’s standard on Respiratory Protection Safety Management Systems. Only someone who is qualified, experienced and well versed in the use of respirators will be appointed to this position. This official will be tasked with carrying out and overseeing the implementation of respiratory systems as part of OSHA’s standard on Respiratory Protection Safety Management Systems.

respiratory-protection-safety-management-systemsRespirators for Immediately Dangerous to Life or Health (IDLH) need to be provided whenever and wherever necessary. The conditions that necessitate the issuance of IDLH respirators are spelt out by the OSHA’s standard on Respiratory Protection Safety Management Systems:


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What is an Environmental Impact Statement?

Environmental Impact Statement

An Environmental Impact Statement (EIS) is an important tool that has the objective of making certain federal and other activities more responsible towards the environment. Created in the background of increased awareness of the profound awareness of lifestyles and the workplace of Americans in the late 1960’s and early 1970’s, when a series of laws and regulations were framed in these areas; the Environmental Impact Statement is a tool that assures better utilization of the environment. It synergizes the environmental, business, and social and cultural aspects.

An Environmental Impact Statement (EIS) is a statement that is prepared to describe and explain the impact an activity has on the environment. The Environmental Protection Agency (EPA) considers an “impact” in this context as any activity that results in some kind of consequence to the environment. So, what is the environment according to the EPA? It includes any or all of these:

environmental-impact-statement-eisThe last of these is the biggest differentiator between this and other legislations in this area. The Environmental Impact Statement is the culmination of thought that has gone into Environmental Impact Assessment (EIA). The cultural and human aspects of any activity on the environment are considered its most important aspect.

When an impact is made on the environment, it is natural to associate the word “impact” in this context with something that is negative. But it is not so for the EPA. An environmental impact can be either positive or negative, and the activity that causes either has of these has to report it.

Apart from defining what an impact is; the EPA also describes what is to be done to mitigate a negative impact.

The National Environmental Policy Act of 1969 (NEPA)The National Environmental Policy Act (NEPA) brought about the Environmental Impact Statement. The NEPA was promulgated in 1969. The highlight of NEPA regulations is that they take the whole spectrum of human activity on the environment into consideration, and as such, require the appropriate federal agencies to discuss the effects of a proposed action on the environment.

NEPA also offers a broad scope for fairly reasonable alternatives in an EIS. It requires those involved in any activity that comes under the scope of the NEPA to include comprehensive information in the EIS so that the Environmental Impact Statement reviewers have enough material to evaluate the merits that each alternative offers.

Elements of an EISAn Environmental Impact Statement needs to have the following elements:

  • Cover sheet, which includes information about the activity and its stakeholders and contact details
  • Summary, in which the scope of the activity is to be mentioned, along with the areas of dispute or contention
  • Table of contents
  • Purpose and need statement, which explains the need and nature of the activity
  • Alternatives, which explain the various alternatives that can be taken up
  • Environment that gets affected
  • List of persons, organizations and agencies to which the Environmental Impact Statement was sent
  • Appendices if required
Supplement to the EISThe Environmental Impact Statement may have a supplement added to it in the event of the following:

Current situation of the Environmental Impact Statement and prospectsThe Environmental Impact Statement is hailed as an important tool that goes a long way in taking the human, social and cultural aspects an activity has on the environment into consideration in a more holistic manner than other laws. Yet, given that the Environmental Impact Statement concept came into being many years before the advent of the Internet; there is sufficient scope for improving its functions and utilities in the years to come. With the Internet having spawned many technologies and tools such as spatial data and GIS; the scope of the Environmental Impact Statement has got expanded further. The EPA has a greater opportunity coming up with the use of these technologies.


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What is Accounting Fraud and How to Prevent Financial Statement Fraud

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Key Takeaway: An understanding of what is accounting fraud and how to prevent financial statement fraud is an important lesson for managements across the world, in any kind of business. In the simplest terms, accounting fraud is the practice of manipulating accounting records so that the actual financial condition is hid from the investors, the public or the other stakeholders and a false picture, which shows the company to be in a falsely healthy condition, is presented in the books.

accounting-fraud-to-prevent-financial-statement-fraudFinancial management can go haywire if the proper steps for preventing accounting fraud are not taken. Companies need to have a solid understanding of how to prevent financial statement fraud, or else their hard work and effort go down the drain, and making up for lost financial gains becomes a herculean task.

Accounting fraud is perhaps as old as accounting itself. However, with the American corporate sector having committed financial misdoings of an unprecedented scale starting from about the late 1990’s, the need for an actual congressional legislation was deemed necessary to prevent the onslaught of these financial scandals, most of which were the result of accounting frauds carried out on the financial statements of the companies that carried out these scandals.

A long list of corporate frauds 
accounting-fraud-to-prevent-financial-statement-fraudManipulating the balance sheet has been at the core of most accounting frauds that shook the American corporate sector and culminated in the enactment of the Sarbanes Oxley Act:

  • The Waste Management scandal
  • Enron
  • WorldCom
  • Tyco
  • HealthSouth
  • Freddie Mac
  • AIG
  • Lehman Brothers
  • Bernie Madoff
  • Halliburton

Accountants can manipulate their financial statements and carry out a number of fraudulent activities that can be termed as accounting fraud. These are some of the practices that are common among accounting professionals who got caught by these famous scandals:


Internal controlsInternal controls in the form of deep and thorough scrutiny of the accounts records is the surest means for ensuring that the financial statement fraud does not take place. Staying compliant with the provisions of the SOX Act is another step in the right direction. Many companies supplement these by putting sound investigational techniques in place.

accounting-fraud-to-prevent-financial-statement-fraudCompanies can keep many checks and controls in place in the form of internal controls. They can ensure that the financial statements are vetted at various levels, starting with the accounts clerk and going all the way to the CFO. Not all types of accounts may need intervention from the CFO, but those that don’t can be handled by those in Finance who report to the CFO.

Making accounts pass through more than one sourceCrosschecking or double-checking accounts is another means of preventing financial statement fraud. The company can make a rule by which financial statements such as purchase records get checked by more than one person, with the aim of putting curbs on passing bills. When bills have to go through more than one person or level, there is a good chance of immediately detecting a fraud or a potential one. These employees can collude and cause a fraud anyway, but this is comparatively difficult, as in theory and practice, everyone through whom the bills get passed has to be involved to commit the fraud.

AuditsAudits, both internal and external, are another means of preventing financial statement fraud. When audits are carried out internally and checked by an independent, outside agency; a check is put in place, making financial statement fraud that much more difficult to commit.

accounting-fraud-to-prevent-financial-statement-fraudWhen organizations put a good whistleblower culture in place, it can be a very strong deterrent at preventing financial statement fraud. This is not the easiest of practices to implement, but is strong one when it is implemented well. Ensuring security and protections for the whistleblowers, plus fixing rewards for their act is a means for motivating employees to take part in whistleblowing. To prevent misuse, the management can also put a system in place where wrongly called out whistleblowing results in penalties.


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What is a Performance and Talent Management System?


Talent Management System.jpgPerformance and talent management systems have been acquiring importance of late as management systems that help track employee performance in a more comprehensive manner than human resources management systems (HRIS). Where a performance and talent management system differs from an HRIS is that while the latter takes the physical aspects of the employee records into consideration; a performance and talent management system goes beyond just the numbers and incorporates the qualitative aspects of tracking everything from recruitment to retirement.

performance-and-talent-management-systemA performance and talent management system is meant to help overcome the shortfalls of an HRIS. An HRIS is primarily meant to input physical values relating to the employee, such as time in and time out, payroll, deductions and such other items. A performance and talent management system is more of a strategic inputter for the enterprise. It helps to locate, invite and nurture talent, and then helps HR to measure and quantify these and arrive at reasonable decisions.

The four cornerstones of a performance and talent management systemperformance-and-talent-management-systemSince a performance and talent management system is more detailed and of a slightly different nature from an HRIS; it is built on a few cornerstones of its own. These pillars of a performance and talent management system, which help to round up the product and make it what it is, can be summarized into the following:

performance-and-talent-management-systemRecruitmentThe first important feature of a performance and talent management system is the one relating to recruitment. The performance and talent management system should have software that tracks everything about the employee’s recruitment, starting from the time she was a candidate, to the time of onboarding. It usually has an interface that tracks everything from the ad calling for the position to be filled up to the actual joining. The recruitment feature of a performance and talent management system also offers the opportunity to upload ads on the social media and the web. It is thus an important feature that helps to streamline and document all stages of the recruitment.

Learning and developmentperformance-and-talent-management-systemAnother important element of a performance and talent management system is the way it helps to keep track of the employee’s training programs. It helps to identity the training needs of each employee based on the feedback HR gets from the reporting manager. It then documents the training that took place after the program was planned and executed, and finally, also the extent to which the training met its purpose. A performance and talent management system should have a learning module that familiarizes it with the latest learning trends in the particular industry and should help it initiate training needs that are best suited for the employee and the organization.

Performance managementOne of the other core features of a performance and talent management system is the one that helps management evaluate the performance of the employees. Employee performance is the most important criterion for judging an employee’s abilities, strengths and weaknesses. These days, the traditional annual appraisal methods are making way for specific task and goal-oriented assessments, because many organizations think that it makes sense to give a person a task to carry out and judge her abilities in relation to how she carried it out, rather than waiting for a whole year to do so. A performance and talent management system aligns perfectly well with this concept, as it keeps track of employee performance management during a defined training program or task, as well as in relation to a timeframe.

Compensationperformance-and-talent-management-systemLike performance, the direction of compensation too, is changing to a more task related nature. A few organizations are no longer waiting for a whole year to add bonuses to employees who show exceptional qualities at work. They are quick at offering rewards more for specific tasks than over fixed durations of work. This is another area in which a performance and talent management system comes in handy, since it measures compensation on a task-to-task basis.


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