Using SOPs to Focus Due Diligence: What They Tell Us About Management and Risks
Posted 01 July 2009 | By
Companies are paying increasing attention to risk assessment and risk management-and with good reason. While research and development costs are rising rapidly (Figure 1), the number of new marketing approvals is not. Further, an interruption in the production of a marketed product creates two major problems: it reduces revenues and can imperil market share. To identify risks that may affect a company's product development processes and the safety, quality and reliability of its products, managers may institute due diligence to find these risks. However, conducting due diligence can be costly and time consuming. Where should auditors focus attention? A good starting point is a review of the company's regulatory and standard operating procedure (SOPs), the "canaries in the coalmine." If essential procedures are not in place, if there are gaps in the set of written procedures, if procedures are poorly written, or if training is inadequate, there will be a greater risk of poor-quality work that affects both products and profits. By focusing on operations that are not supported by current, well-written SOPs, the due diligence team increases the chance of identifying risks affecting a company's performance.