by Michael Arbow, MBA
Partner, RSD Solutions Inc.
A while ago a tech oriented friend (jeffroach.ca) commented on the effect of the bursting of the dot-com bubble between March 2000 and 2001: his observation was that tech advancements from Silicon Valley were pushed back by 3 or so years. On a related note, in a Globe and Mail article today, it was pointed out that new medicine approvals have slumped to the lowest level in a decade. How is this related? When the tech bubble burst, the flow of angel, private and corporate venture capital dried up in all sectors, including the search for new medicines. With the lead time from inception to commercial launch of pharmaceuticals for human use being an average of 7 to 10 years, we are now witnessing the demise of that new venture funding 10 years ago.
So what does this have to do with risk management? The collapse of the tech bubble caused a sweeping focus on downside risk (understandably as USD $1 trillion was wiped from the US equity markets) with perhaps little thought to the cost this would have on reducing upside risk – especially in the longer term. Limiting all corporate activities to reduce downside expose does have a cost; in this particular instance pharmaceutical firms and the greater human populace are about to begin paying for it now. Firms must be more selective in deciding which downside risk to address and at what cost now and in the future.
For more on medicine approvals click on the link to a Globe and Mail article:
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