Risk management

Risk management

Risk management is embedded in our strategy and is considered important for achieving our operational targets.

To safeguard the proper implementation and execution of the Group’s strategy, we have an internal risk management and control system. The Board of Directors has delegated an active role to the Audit Committee members for designing, implementing and operating Galapagos’ internal risk management and control systems. The purpose of these systems is to manage in an effective and efficient manner the significant risks to which Galapagos is exposed.

The internal control system is designed to ensure:

  • The careful monitoring of the effectiveness of our strategy
  • Galapagos’ continuity and sustainability, through, for instance, consistent accounting, reliable financial reporting and compliance with laws and regulations
  • Our focus on the most efficient and effective way to conduct our business

We have defined our risk tolerance on a number of internal and external factors including:

  • Financial strength in the long run, represented by revenue growth and a solid balance sheet
  • Liquidity in the short run; cash
  • Business performance measures; operational and net profitability
  • Scientific risks and opportunities
  • Dependence on our alliance partners
  • Compliance with relevant rules and regulations
  • Reputation

The identification and analysis of risks is an ongoing process that is naturally a critical component of internal control. On the basis of these factors and Galapagos’ risk tolerance, the key controls within Galapagos will be registered and the effectiveness will be monitored. If the assessment shows the necessity to modify the controls we will do so. This could be the situation if the external environment changes, or the laws or regulations or the strategy of Galapagos change.

The financial risks of Galapagos are managed centrally. The finance department of Galapagos coordinates the access to national and international financial markets and considers and manages continuously the financial risks concerning the activities of the Group. These relate to the financial markets risk, credit risk, liquidity risk and currency risk. There are no other important risks, such as interest rate risk, because the Group has nearly no financial debt and has a strong cash position. The Group does not buy or trade financial instruments for speculative purposes. For further reference on financial risk management, see note 34 of the notes to the consolidated financial statements. We also refer to the “Risk factors” section of the Annual Report for additional details on general risk factors.