How can environmental risks be prioritized in strategic risk management?

1 What is strategic risk management?

Strategic risk management is the process of identifying, analyzing, and managing the risks that can affect your organization's ability to achieve its strategic objectives and vision. It involves aligning your risk appetite and tolerance with your strategic goals, and developing plans and actions to mitigate or exploit the risks that can impact your performance, reputation, and value creation. Strategic risk management is not a one-time exercise, but a continuous and dynamic process that requires regular monitoring, evaluation, and adaptation.

2 Why prioritize environmental risks?

Environmental risks are among the most complex, uncertain, and interconnected risks that businesses face today. They can have direct and indirect impacts on your operations, markets, customers, suppliers, competitors, regulators, and stakeholders. They can also create new opportunities for innovation, differentiation, and growth, if you can anticipate and respond to them effectively. Prioritizing environmental risks means recognizing their relevance and significance for your strategic objectives, and allocating your resources and efforts accordingly.

3 How to identify environmental risks?

When prioritizing environmental risks, the first step is to identify them. You can use various sources and methods to gather information about the environmental issues and trends that can affect your business. This includes scanning the external environment for political, economic, social, technological, legal, and ecological factors; engaging with internal and external stakeholders to understand their perspectives; conducting a SWOT analysis to assess strengths and weaknesses; and performing a scenario analysis to explore possible future outcomes. All of these measures can help you gain insights into environmental risks and make informed decisions.

4 How to assess environmental risks?

The next step in prioritizing environmental risks is to assess them. You can use various criteria and tools to measure and compare the likelihood and impact of environmental risks, such as estimating the probability and severity of environmental risks based on historical data, expert opinions, or models. Additionally, you should evaluate the exposure and vulnerability of your business to environmental risks based on your geographic location, industry sector, value chain, products, services, and processes. Furthermore, it's important to consider the velocity and volatility of environmental risks based on how fast and how much they can change over time. Lastly, you can apply a risk matrix or a heat map to visualize and rank the environmental risks according to their likelihood and impact.

5 How to respond to environmental risks?

The final step in prioritizing environmental risks is to respond to them. You can avoid or eliminate unacceptable or unmanageable risks, reduce or transfer high or moderate risks through implementing controls, standards, policies, or contracts, accept or retain low or negligible risks by monitoring, reporting, or disclosing them and exploit or leverage positive or beneficial risks by creating, enhancing, or capturing value from them.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?