The cost of environmental impact on businesses is expected to accelerate. The post, What are the Sustainability Mega Forces Poised to Change Business? identifies forces shaping impacts, but how can we manage risk as a business opportunity? Is there a framework available specific to business sustainability risk?
In Expanding Perspectives of Business Sustainability Risk and other previously released posts, our sustainability consulting has focused its attention on defining key risks, identifying reference points, and evaluating the potential impacts to long-term business sustainability. Expanding on this discussion, we turn our attention to ‘risk assessment’ by exploring popular risk frameworks and their applicability to business sustainability risk management.
The PricewaterhouseCoopers whitepaper, A Practical Guide to Risk Assessment, offers one such perspective of risk measurement and management. Beginning with a definition:
“Risk assessment is a systematic process for identifying and evaluating events (i.e., possible risks and opportunities) that could affect the achievement of objectives, positively or negatively. Such events can be identified in the external environment (e.g., economic trends, regulatory landscape, and competition) and within an organization’s internal environment (e.g., people, process, and infrastructure). When these events intersect with an organization’s objectives—or can be predicted to do so—they become risks. Risk is therefore defined as the possibility that an event will occur and adversely affect the achievement of objectives.” – PricewaterhouseCoopers
As the paper states, “performing a risk assessment requires defining and consistently applying an approach that is tailored to the organization”. PwC’s guidance offers a structured framework with defined ‘essential’ steps in a risk assessment process.
1. Identify relevant business objectives
2. Identify events that could affect the achievement of objectives
3. Determine risk tolerance
4. Assess inherent likelihood and impact of risks
5. Evaluate the portfolio of risks and determine risk responses
6. Assess residual likelihood and impact of risks
The need to build risk management monitoring and surveillance into a comprehensive business sustainability plan has become a priority with more and more business executives. With an ability to identify the indicators of change and proactively respond, your organization can stay one step ahead. Our sustainability consulting provides information and resource to companies seeking to mitigate risk by making proactive changes to traditional business practices.