Articles
Risk Aversion as a Profitability-Limiting Factor in Clinical Trial Conduct
By Timothy Pratt, PhD
Originally published in PharmaVOICE, June 2005
Risk, according to the Oxford English Dictionary, is quite simply "the possibility that something unpleasant will happen."
"Risk aversion then is avoiding the possibility of an unpleasant occurrence, "says Timothy Pratt, Ph.D., chief marketing officer of MedNet Solutions, Inc. "This seems straightforward enough - few people want unpleasant things to happen to them in their personal lives and even fewer in their business lives. To ultimately avoid risk, perhaps we should all stay home in bed - except then we'd all have to buy an ionic breeze Quadra, because the Sharper Image people keep telling us: 'Indoor air pollution rates are one of the top five environmental hazards in the country,' which plays upon the risk of not having an ionic breeze.
"Lying in bed for the rest of our lives is not an option open to most of us, so we engage in risk-taking behaviors to achieve our goals - not least of which is working to pay for the bed to sleep in," Dr. Pratt continues. "We travel to work, play sports, pursue partners - all of which have the distinct possibility of ending unpleasantly - but we do it to achieve some other goal that we feel warrants the risk involved. Prudent people try to mitigate risk - but very few, if any, try to avoid risk altogether; perhaps their beds aren't comfortable enough.
"Mitigating risk is the process of taking certain actions to limit the amount or degree of unpleasantness that may occur," Dr. Pratt says. "Almost any business action involves risk - from opening up a cake stall at the local bake sale to setting the marketing strategy for a multibillion-dollar corporation. Risk is taken to achieve a desired goal, while risk mitigation is employed to avoid disaster. In business, risk is unavoidable, but in clinical trials the 'risk-free' nirvana remains the Holy Grail, and aversion is employed where mitigation is needed."
