The Critical Importance of Sustainability Risk Management
Risk Management; New York › Vol. 53 Nbr. 4, April 2006
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Summary
Sustainability risk management deals with emerging environmental and social justice risks. Risk managers will need to anticipate these risks and develop appropriate risk mitigation and financing strategies for them, but since many sustainability risks are new and emerging, the best strategies for dealing with corporate sustainability might not be apparent. A brief look at sustainability risk management techniques demonstrates how risk costs can be reduced. An effective sustainability risk assessment strategy is to prepare a corporate sustainability report. Preparing a report helps to assemble, organize and benchmark sustainability data and efforts of the firm. While some companies develop sustainability strategies based on ethical motives, most firms do so for business reasons. Risk managers have a tremendous opportunity to contribute to their firms' overall management strategy by implementing sound sustainability risk management practices.
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The Critical Importance of Sustainability Risk Management
Sustainability risk management deals with emerging environmental and social justice risks. Risk managers will need to anticipate these risks and develop appropriate risk mitigation and financing strategies for them, but since many sustainability risks are new and emerging, the best strategies for dealing with corporate sustainability might not be apparent. But in a world where the rules of business are changing faster than ever, now is not the time for ignorance.
Examples of emerging sustainability risks are useful in demonstrating their broad scope. The Exxon Valdez Alaskan oil spill in 1989 was catastrophic in terms of environmental damage and disruption of local businesses. The $5 billion punitive damage award, which has still not been settled, was one of the largest at the time. Asbestos resulted in the worst product liability toxic tort to date, and instead of abating as was expeered, claims have begun to increase again. Superfund liabilities have been incurred for over 20 years, and continue to disrupt organizat...See the full content of this document
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