Risk Management Tools,
Techniques and Tribulations:
The Pain and Recovery in Life Sciences
Project Management Institute – SF Bay Area Chapter
Embassy Suites, Walnut Creek
March 17, 2010
Moderator
Tim Salaver, MBA, PMP, CSSMBB
Principal, Cornerstone Systems Solutions
President, Golden Gate Chapter of APICS The Association for
Operations Management
EVP, Operations and Technology, Bio Supply Management
Alliance
Director, Certification Preparation, PMI-SFBAC
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Life Science Risk Management
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Supply Chain Risk Management
Bill Coakley, MBA
Sr. Director, Supply Chain Management, SciClone
Pharmaceuticals
Chairman, Sourcing Management Steering
Committee, Bio Supply Management Alliance
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Project Risk Management
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Linda Karr, MBA, PMP
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Project Manager, Pharma Technical Development, Genentech
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President, San Francisco Chapter of International Society for
Pharmaceutical Engineering (ISPE)
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Enterprise & Operations
Risk Management
Chris Sam, MS, Risk Management
Executive Director, Craigshannock
Member, Risk Management Steering Committee, Bio Supply Management
Alliance
Executive Committee member of the Strategic Risk Management Council
of the Conference Board
Former Executive Director, Operations Risk Management, Amgen
25 years in energy industry, previously at ExxonMobil
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Industry Risk Management
Jane Lavine, MBA, CPCU, ARM, CFE
Life Science Risk Management consultant
Former VP, Life Science Practice, Marsh
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The Healthcare System
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Life Science Risk Management
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The Healthcare Shuffle
Rx Delivery
System
Biotechnology/
Pharmaceutical
manufacturer
Patient’s Pharmacy
Specialists
Rx
Gov. Health Agencies
Referring MD
Compliance
Orders
Lab Tests
X-rays
Pathology
Etc.
Orders
Rx
Diagnosis
Diagnosis
Patient’s Medical Record
Provider
Patient’s Insurance
Provider Database
Coverage,
Coding
&
Approvals
Interactions &
Alternatives
Interactive Prescription
Database
Patient’s Primary Care
MD Pocket PC
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The Life Sciences
Biotechnology
Pharmaceuticals
Medical Devices
Diagnostics
Nutraceuticals
Animal Biologics
Distributors or Delivery System (e.g., Cardinal Health,
McKesson, Amerisource-Bergen)
Healthcare Providers
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Managing Risks Related to
Pharmaceuticals and Biotechnology
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Tremendous Opportunity for Improvement in Healthcare
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Electronic Medical Records Standardization Initiative
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The Technology exists to Revolutionize Healthcare (not just
reform)
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Driven By Department of Health – Bypassing Standards Bodies
Calling for Compliance by 2015
Save Lives
Reduce Costs
Improve Quality of Care
The Strategy and Relationships are mostly in Place
Risks remain high for the companies manufacturing the
drugs….WHY?
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Audience question:
What happens prior to the drugs getting to
the pharmacy?
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Life Science Risk Management
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Project Risk Management in the
Drug Development Pipeline
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Life Science Risk Management
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Typical Drug Development Pipeline
Product/Process Development
Panel Question
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At what point in the pipeline do you get involved and
what is your role in managing risk?
Product/Process Development
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Life Science Risk Management
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Panel Question
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In your role, do you have the ability to pull the “andon”
cord?
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Life Science Risk Management
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Panel Question
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In your specific role, how important are you in managing
risks to the patient? This question is important to note
because while the manufacturer does not have a direct
relationship to the patient, the quality of care is
dependent on the quality of the product.
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Panel Question
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What tools and techniques do you employ to identify risks?
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Life Science Risk Management
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Project Risk Management in
the Product Life Cycle
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PMI Risk Management Process
Pre-Launch:
Commercialization Product Life Cycle
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What inherent risks are addressed prior to product
launch?
Product/Process Development
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Life Science Risk Management
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Post-Launch:
Commercialization Product Life Cycle
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What steps do you take to mitigate risks post
commercialization?
Product/Process Development
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Risk Management
Tools and Techniques
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Risk Register - example
What is this
1 risk?
2
3
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0
0
0
Category
ID
Risk
Description
Probability
Impact
Detectability
Importance
Project
Project manager
Project artifacts
Risk Management Matrix (Risk Register)
Project title here
Project #
Project manager name here
Sponsor
Location of project documents here
Updated
Trigger
Event/Indicator
What act or event
initiates either the
risk occurrence or
precipitates the
response strategy?
Risk Response
and Description
How will you
respond to this
risk and what
actions will you
take to match
that response?
Contingency
Plan
If the risk
becomes a
reality, what will
you do in
response, as a
backup, or
alternative/
Life Science Risk Management
Project # here
Sponsor name here
Date of update here
Owner Status
Who
monitor
s this
risk?
3/17/2010
Date
Entered
Date to
Review
Risk and Response Log - example
Project Identification
Project Name
Project Manager
Project Team(s)
Project Stage
Project Team
Review Date
<Name of project>
<Name of project manager>
<Name of team or teams using log>
<Name of current stage>
<Name of assigned Project Team Leader>
<Date of last review with team>
Purpose: To document, track and review risks throughout the life of the project.
A "risk" is an uncertain event or condition, which if it occurs, may have a positive or negative affect on a project.
Risk and Response Log
ID #
Prob
<###> <High,
Med,
Low>
Impact
Team
Risk Event
<High, <Identify the
<Briefly describe the risk event>
Med,
team/sub-team
Low> that is
responsible for
monitoring/man
aging identified
risk.>
Risk Impact
Description
<Describe the
impact of the risk
event should it
occur. Provide both
qualitative
information and a
quantitative
estimate>
Strategy
<Avoid/Mitigat
e, Active
Acceptance,
Passive
Acceptance>
Risk Response
Plans
<Describe what will
be done in an
attempt to avoid the
risk event or what
will be done to
mitigate the risk
event should it
occur. Include any
commentary as
needed.>
002
003
004
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Risk Owner
<Identify by name
and role the
individual that
owns the risk
event>
Risk Map (source: Marsh)
Map Key
Clinical trials
2. Sales and marketing
practices
3. Consumer
satisfaction/Company
reputation
4. Environmental
compliance
5. Business Interruption
6. Employee health and
safety
7. Contingent BI- sole
source supplier
8. Intellectual Property
Infringement
9. Transit/supply chain
10. International
regulations
1.
How to use the Risk Map
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The dots represent a sample of risks associated with a life
science company
Each company risk profile is unique
The positioning of the risk dots is both qualitative and
quantitative analysis
The visual format is used to review the different risk
profiles and their relationship to each other
This tool can be used for a function or a specific process
Failure Mode and Effects Analysis - example
Title:Risk Management Presentation
FMEA #:1
Product Name:Professional Development Meeting
Originator:Tim Salaver
Process:Awareness and development of RM tools
Issue Date:3/17/2010
Equipment:
Revision Date:
Participants:PMI
Location:Embassy Suites, Walnut Creek
Type of FMEA:P-FMEA
FMEA Types:System Design, Detailed Design, Process, Equipment
Control(s)
Containment
3
Presenter
Experience
2
None
10
12
Review of training
Tim Salaver
60 results and prepare on
03/17/10
and Panelists
weak items
0
Mostly Developed
Ahead of
Presentation
3
None
10
60
200
Have Time to have
Tim Salaver
Materials Proofed
03/17/10
and Panelists
Independently
0
Experience
2
None
10
72
360
Adjust materials to be
Tim Salaver
covered or lengthen
03/17/10
and Panelists
time
0
0
0
in place
Date
Risk Management
Presentation
Instructor
Lack of Learning
Transfer
2
Risk Management
Presentation
Materials
Lack of
Understanding
4
Risk Management
Presentation
Time
Lack of Time To
Fully Explain
Content
The presentation is
9 not comprehensive 4
enough
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Not Enough Time
5
To Prepare
Actions
Taken
Life Science Risk Management
RPN 3
in place
Action(s)
of Failure
Incompetent
Presenters
Action Results
Due
Detection 3
Mechanism(s)
Owner
Occurrence 2
failure
Recommended
Severity 2
mode
People
Cause(s)/
Current
RPN 2*
Effect(s) of
Current
RPN 1*
Failure
Potential
Detection 2
Machine
Potential
Detection 1
Process
Potential
Occurrence 1
Failure Item:
Severity 1
* RPN
= Risk
Priority
Numbe
r
0
3/17/2010
Workshop on Preparing an FMEA
Failure Mode and Effects Analysis is an effective tool in managing risks
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Life Science Risk Management
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FMEA Process
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Analysis of potential failure modes within a system for classification
by severity or determination of the effect of failures on the system
Widely used in manufacturing industries in various phases of the
product life cycle
Increasingly finding use in the service industry
Failure modes are any errors or defects in a process, design, or item,
especially those that affect the customer, and can be potential or
actual
Effects analysis refers to studying the consequences of those failures
Example FMEA Worksheet
Function
Failure
mode
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Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
FMEA Terms
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Failure mode - A failure mode is an event that causes a loss of a required function.
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Failure effect - Immediate consequences of a failure on operation, function or functionality,
or status of some item.
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Indenture levels - An identifier for item complexity. Complexity increases as levels are closer
to one.
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Local effect - The Failure effect as it applies to the item under analysis.
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Next higher level effect - The Failure effect as it applies at the next higher indenture level.
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End effect - The failure effect at the highest indenture level or total system.
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Failure cause - Defects in design, process, quality, or part application, which are the underlying
cause of the failure or which initiate a process which leads to failure.
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Severity: - The consequences of a failure mode. Severity considers the worst potential
consequence of a failure, determined by the degree of injury, property damage, or system
damage that could ultimately occur.
Example FMEA Worksheet
Function
Failure
mode
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Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
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Step 1 – Detect a Failure Mode
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A worksheet needs to be created, which contains the
important information about the system, such as the
revision date or the names of the components. On this
worksheet all the items or functions of the subject should
be listed in a logical manner, based on the block diagram.
Describe the system and its function.
Good understanding simplifies further analysis.
Consider both intentional and unintentional uses.
A block diagram of the system needs to be created.
Example FMEA Worksheet
Function
Failure
mode
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Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
FMEA Cause and Effect Diagram
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Step 2 - Severity
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Determine all failure modes based on the functional requirements and their
effects
A failure mode in one component can lead to a failure mode in another
component
Write these effects down in terms of what the user might see or
experience
Examples: degraded performance, noise or even injury to a user
Each effect is given a severity number (S) from 1 (no danger) to 10 (critical)
Prioritize the failure modes and their effects
Severity 9 or 10 actions are considered changes in design by eliminating the
failure mode
Example FMEA Worksheet
Function
Failure
mode
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Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
Step 3 - Occurrence
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Detailed development section of the FMEA process
Necessary to look at the cause of a failure and how many
times it occurs
A failure cause is looked upon as a design weakness
All the potential causes for a failure mode should be identified
and documented
Examples of causes are: erroneous algorithms, excessive
voltage or improper operating conditions
A failure mode is given an occurrence ranking (O), again 1–10
Example FMEA Worksheet
Function
Failure
mode
35
Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
Step 4 - Detection
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When appropriate actions are determined, test their efficiency
The proper inspection methods need to be chosen
How likely a failure can be identified or detected.
Each combination from the previous 2 steps receives a detection number
(D).
Assigned detection number measures the risk that the failure will escape
detection.
A high detection number indicates that the chances are high that the failure
will escape detection, or in other words, that the chances of detection are
low.
Example FMEA Worksheet
Function
Failure
mode
36
Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
Risk Priority Numbers
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RPN = S × O × D
Easy to determine the areas of greatest concern
Modes that have the highest RPN should be given the
highest priority for corrective action
Whenever a design or a process changes, an FMEA should
be updated
Example FMEA Worksheet
Function
Failure
mode
37
Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
Exercise
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Can you determine the order of need for change in the
following three examples:
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Severity (5), Occurrence (4), Detection (2) = 40
Severity (9), Occurrence (2), Detection (2) = 36
Severity (8), Occurrence (1), Detection (8) = 64
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The correct order for action is #2, #1, #3. Why?
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Example FMEA Worksheet
Function
Failure
mode
38
Effects
S
(severity
rating)
O
Cause(s)
(occurrence
rating)
Current
controls
D
(detectio
n rating)
CRIT
(critical
characte
ristic
Life Science Risk Management
RPN
(risk
priority
number)
Responsi
Recomm bility and
ended
target
actions completi
on date
3/17/2010
Action
taken
Next Steps
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Eliminate the failure mode with severity of 9 or 10
Minimize the severity of other failure modes
Reduce the occurrence of the failure mode
Improve the detection (reduce the number)
Update the FMEA
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At the beginning of a cycle
Changes are made to the operating conditions
A Change is made in the design
New regulations are instituted
Customer feedback indicates a problem
Life Science Risk Management
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Advantages
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Improve the quality, reliability
and safety of a product/process
Improve company image and
competitiveness
Increase user satisfaction
Reduce system development
timing and cost
Collect information to reduce
future failures, capture
engineering knowledge
Reduce the potential for
warranty concerns
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Early identification and
elimination of potential failure
modes
Emphasize problem prevention
Minimize late changes and
associated cost
Catalyst for teamwork and idea
exchange between functions
Reduce the possibility of same
kind of failure in future
Life Science Risk Management
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Sample BioPharma Case
presented by Chris Sam
Intro to Cp and Cpk (Measurements of process capabilities used in quality analysis.)

Cp - Inherent Process Capability
 Note: in some industries this calculation is called pk. This is the ratio of the Upper
Specification Limit minus the Lower Specification Limit to six sigma. It is denoted
by the symbol Cp.

Cp = (Upper Spec Limit - Lower Spec Limit) 6Sigma Actual
 Cannot calculate Cp if specifications are one sided. In other words, if
specification only has an upper parameter specification limit or a lower
specification limit, Cp is ignored and only Cpk can be used.
 Confusion about the difference between Cp and Cpk. The difference is in
calculating the actual sigma or standard deviation, either using an estimate, or the
actual calculations.
 Terms are sometimes used interchangeable, even though they are not. the same.
 Statistics IS a science, and as such, all theory should be able to be validated by
such peer reviews.
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Life Science Risk Management
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Sample BioPharma Case
presented by Chris Sam
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Introduction to FMEA software
You help to complete the missing information
Using Cp and Cpk analysis
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Life Science Risk Management
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Q&A
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Life Science Risk Management
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Additional Resources
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APICS The Association for Operations Management
(www.apics-ggc.org)
Bio Supply Management Alliance
(www.biosupplyalliance.org)
International Society for Pharmaceutical Engineers
(www.ispe.org)
Strategic Risk Management Council (www.conferenceboard.org)
Marsh Risk Consulting (www.marshriskconsulting.com)
For more information, please send email to tim@biosupplyalliance.org
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Life Science Risk Management
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THANK YOU FOR YOUR PARTICIPATION
Have a safe and risk-free drive home!!!