Andrej Škulj, vodja SVZD Uspešni delajo varno in zdravo, Brdo pri Kranju, The Cost and Benefit Analysis of providing safety and health at work in the Krka company, d. d., Novo mesto

Organization scheme of the Krka group Western Europe and overseas markets Central Europe South- Eastern Europe Eastern Europe

Employees 6777 employees Number of people employed in the company and Krka group on 31 December companygroup

Development strategy of Krka group Development strategy MISSION To live a healthy life VISION To strengthen the position as one of major pharmaceutical generic companies on the European market VALUES Agility and flexibility Partnership and trust Creativity and efficiency

Key strategic goals by 2012 To achieve more than 10-percent of average annual growth rate of the sale. To keep at least 40-percent share of new products in the total sale. To strengthen competitive advantage of product portfolio through a vertical integration and placing selected products on selected key markets as a first generic drug. To improve business indicators. To use efficiently the means and improve cost effectiveness of the products. To improve innovation level. To preserve independence.

Integrated management system Permanent improvements Integrated management system INTEGRATED QUALITY SYSTEM RESPONSIBLE BEHAVIOUR SAFETY HEALTH ENVIRONMENT INFORMATION MANAGEMENT QUALITY COMMON GOAL

Risk management Risk areaRisk descriptionManagement methodExposure Intellectual propertyViolation of rights from the title of intellectual property of third party Consistent watch over intellectual property of other entities, monitoring patents, design of reservation Moderate Regulatory proceduresChanging legislation or its interpretationConsultation with regulatory authorities in the process of developing the product Moderate Development processThe risk that the developed product will not have appropriate characteristics or will be inappropriate from the view of patent situation Vertically integrated model of businessModerate Reliability of suppliers and contracting partners Possibility of irregular and inappropriate supplies or non competitive prices To analyse the risk of individual suppliers and accepting suitable measures in the case of inappropriate business operation with the supplier Moderate Availability of production capabilities Unplanned stops, disturbances or faults in production Regular preventive maintenance and measuresSmall Environment protectionDanger due to outstanding events with adverse effect on environment Preventive rehearsals and prescribed internal procedures in the case of outstanding event Small Information sourcesRisk of disturbances in business processes due to disturbances in the field of information sources Independent security checks and measures, foreseen in advance, for elimination of disturbances Moderate employeesRisk of losing key employees and lack of professional skilled workers Systematic work with key employees, awards, development of human resources, constant training, measuring organizational culture and atmosphere Moderate Safety and health at workAccidents or injuries at workVerification of technological procedures, computer.-assisted system of risk evaluation Moderate Protection of propertyRisk of alienation of propertyPlan of protectionmoderate

Sales of the group and Krka company 781 mio € 100 % Sales of the company Annual growth rates of the company sale Sales of the group Annual growth rates of the group sale

Sale by regions Slovenia SE Europe Eastern Europe Central Europe Western Europe and overseas markets SHARES OF REGIONS IN THE KRKA GROUP SALES IN 2007

Investments 14,5 % for investments INVESTMENTS OF THE KRKA GROUP IN THE PERIOD investments Investment shares in the sale

Investments – common characteristics Most modern technical solutions and guidelines of good production practice are considered The highest European standards for safety and protection of people and environment are considered Integrated safety

Costs of integrated safety mio € sales 2007 = 100 % mio € investments 2007 = 14.5 % of sale - V.: What is the SHW share in investments? - O.: ~20% - This is 3% of sale or mio €

Costs (PPE, HC, training, inspection of WE, maintenance …) Personal protection equipment mio € or 0.11 % SHW Key goals and programmes Health care Recreation of employed Training for SHW VSAPZ Risk evaluation Inspection of working equipment Other Total mio € %

Costs of safety and health at work Integrated safety 3% from sale or mio € Costs (PPE, HC, training, inspections of WE, maintenance…) 0.3 % from sale or 2.5 mio € TOTAL 3.3% from sale or mio €

Costs of safety and health at work SHW COSTS IN % FROM THE SALES INCOME SHW in new projects, investments, reconstructions Personal protection equipment Health care Preventive recreation (weekly) Training Preventive inspection of working equipment Risk evaluation other Personal protection equipment Health care Preventive recreation (weekly) Training Preventive inspection of working equipment Risk evaluation other

Important Costs related directly to the employees are 10-times lower than the costs of integrated – technical safety SHW costs depend on investments in the current year Every year several million € go to investments, but their share in the sale is every year smaller CONCLUSION: share of SHW costs is according to the sale decreasing from year to year

CONCLUSION Although the situation of safety and health at work is improving from year to year, the share of SHW costs is according to the sales decreasing yearly. CONDITION: annual two-cipher sale growth

Benefits from providing SHW Less accidents Less severe accidents Smaller sick leave Number of accidents in 12 years Sick leave because of accidents in last 10 years

Benefits from providing SHW Lower insurance premiums (investment in sprinkler returns in 10 years) Less incidents Greater reliability of process operation (1 hour of transport system standstill= €) Example: 5 hours of standstill represents the same expense as the expense for correct and safe work training

Benefits from providing SHW – soft part Good name of a company Candidates for job are more skilled Greater satisfaction and motivation for work (satisfaction with working conditions in 2007 = 4.1 on the chart from 1 to 5) Smaller fluctuation Less faults – experienced and skilled staff Satisfied customers Increase of market share

Importance of regulated SHW for a company COMPETITIVE ADVANTAGE