Environmental Risk Management Gaining Corporate Visibility, But Uncertainties Raise Planning Challenges
Stakeholder pressure, the complexity of business relationships and the threat from climate change are driving companies to more carefully assess their environmental risks, according to a recent survey.
Stakeholder pressure, the complexity of business relationships and the threat from climate change are driving companies to more carefully assess their environmental risks, according to a recent
survey.
Among the 320 risk managers questioned for the Economist Intelligence Unit study, the majority say they are increasing the attention and resources that they dedicate to environmental risk management. To date, this category of risk has tended to be managed either as an ad hoc activity or separate from the overall risk management framework.
However, when companies are planning major strategic activities, the consideration of environmental risk remains the exception rather than the rule. Less than half of respondents say that they undertake a formal assessment of environmental risk when developing new products and services, and fewer than one in five when planning mergers and acquisitions.
A key challenge for many companies appears to be a lack of visibility beyond the walls of their own organization. The complexity of today's supply chain and the interconnected web of partner organizations that support most businesses give rise to "blind spots" in a company's ability to manage environmental risk effectively across the entire enterprise, says the report.
Efforts in environmental risk management are also hindered by the uncertainty of the scale of environmental liabilities, respondents say. The high degree of uncertainty associated with climate change, extreme weather events and other major environmental risks make it difficult for companies seeking to identify and quantify their exposure.
On the positive side, the report found that environmental risk management improves a company’s reputation with customers. Also, while 44 percent of respondents see the risks from climate change as significant, 49 percent see new and emerging opportunities associated with efforts to address climate change.
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