The Study of Effectiveness of Risk Management and Its Impact on Organizational Performance of Pharmaceutical Industry of Pakistan

Abstract

The purpose of this study is to examine the relationship between critical risk factor (CRF)/ critical success factors (CSF) and effectiveness of risk management (ERM), and in turn its relationship with organizational performance (OP) through mediating effect of ERM. Five critical risk factors included in this study are clear communication (CC) of risk, Good leadership (GL), Regulatory compliance (RC), organizational culture (OC), and training/ competency (TAC) of employees to identify assess and control risk associated with pharmaceutical industry of Pakistan. Organizational performance was taken in term of reduction in product failure, improving product quality, increasing confidence on product safety, reduction of cost and preventing rework. Data were collected using an online questionnaire on Google form, sent to private and public sector organizations located within Pakistan. The data analysis and hypotheses testing were performed using correlation analysis, regression and structural equation modeling using smart PLS. The results showed that all five CSF positively affects the effectiveness of risk management. Effectiveness of risk management also showed a significant positive effect on organizational performance both directly and through mediation between CSF and organizational performance. The results can help management at all level to a better understanding of the linkage between CSF, ERM and organizational performance. They could use the results of this study to design their ERM practices accordingly. To the authors' best knowledge, this paper is the first empirical study within pharmaceutical industry of Pakistan that has investigated the relationship between CSF, ERM and organizational performance.