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What is Environmental Risk Management?

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  • Written By: Jason C. Chavis
  • Edited By: Lindsay D.
  • Last Modified Date: 28 October 2016
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Companies and organizations must assess, mitigate, and monitor certain risks involved with their daily operations. A specific area of risk that must be identified is that on the local and global environment. Accidents, natural events, and deliberate assaults are all possible ways for an enterprise to cause pollution or other risks. In order to limit, and hopefully prevent these situations, environmental risk management places a strong emphasis on targeting the problems that could arise and implements a system of metrics that help with prevention.

This practice is used by both public and private sectors of the economy. An organization must establish procedures that manage the uncertainty of its operations, which involves following certain protocol and implementing tools that will ensure conformance to those procedures. These procedures must be applied to day-to-day activities that may be a threat to environmental well-being, as well as overall infrastructure assessment, to lower or eliminate damage to the environment caused by the organization.

The first step to properly ensuring environmental risk management is effective within the organization is to identify the most critical assets of the enterprise. How these assets function within the broader landscape of the environment is important. The organization must determine if any of these assets are a threat to the long-term stability of the environment and how they will ultimately impact the life of the business.

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An organization must then identify any changes that may be a threat to its continued existence. For example, if the company uses large quantities of paper, the fact that the level of natural tree growth continues to dwindle is a long-term threat to the survival of the organization. The enterprise must find a way to ensure that the paper source continues to grow as the business grows. One way this could be mitigated is by purchasing a segment of the forest sector or implementing a recycled paper program.

Vulnerability is paramount in determining the risks associated with specific types of events. The organization must make an assessment of which areas are most likely to cause problems and which ones are unlikely. This allows the business to allocate assets in an effort to stave off the likely effects of the threat. A business will be able to find the most critical elements of environmental threat and move the most amount of assets to combat this possibility. This helps a company prioritize.

Another option for handling environmental risk management includes the transfer of risks to another party. This can be handled by outsourcing certain aspects of the company's operations, or by utilizing risk insurance programs to guarantee a limited amount of liability in the event of a catastrophe.

While an organization can adjust its operations to handle certain criteria in which it operates on a daily or long-term basis. There are a number of threats in which a company has very little control. Natural disasters such as earthquakes, hurricanes or volcanoes are difficult to predict and can cause significant problems for a company, particularly if it is headquartered in an area in which these events are commonplace. Using environmental risk management, an enterprise will adjust to these threats by establishing itself in areas in which these events generally do not occur.

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anon297441
Post 5

It is important to address disaster preparedness planning in environmental risk management, because it has two sides.

Due to development and construction activities, causes will initiate and develop. Also, due to natural and man made disasters there is an overall impact, for example, the 2011 Thailand floods affected their industries (so they didn't have a properly developed DP plan).

wrupert
Post 3

@ValleyFiah: Thanks a lot for your comment. I am very much interested about getting into environmental risk management. Could you recommend company's consulting on this subject or any more reading material on this topic. Thank you in advance.

ValleyFiah
Post 2

Environmental risk management firms are often hired when a company makes a large plant investment, during acquisition and mergers, and to consult on real estate investments. Big environmental mishaps can be very damaging to a company. Companies can face litigation for their actions or inactions, shareholders can be scared into dumping their investments, and the company's reputation can take a significant hit when environmental disasters occur.

A perfect example of why environmental risk management is important can be seen in the BP oil spill. Failures in safety procedures, cutting corners, and general complacency led to the deaths of 11 rig workers and the worst environmental disaster in United States history. Competent environmental risk management could have prevented such a disaster. Instead BP is facing criminal charges, and the entire oil and gas industry will most likely be overhauled. If anyone is thinking about getting into environmental risk management now may be a good time.

anon53259
Post 1

That's a good one. Thanks a lot.

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