Risk Management and Sustainability have much to gain from coordination

Risk Management and Sustainability have much to gain from coordination
October 29, 2013

Sustainability and risk management in an organization have much to gain from coordination. A better integration between these processes increases their legitimacy and the administrative costs are reduced. Also by linking these processes to operational and business benefits a natural catalyst is created.

Although sometimes it may seem like a utopia, it is key to a successful risk-management approach that in as natural a way as possible connect it to the organization’s business objectives. Proactive management of risks should be part of the organization’s core processes, thereby contributing to the achievement of goals. In the private sector this means that the CEO and board, to a greater extent than would otherwise be expected, can deliver the promised profits to shareholders. How the connection is made can vary, but financial and thus measurable incentives are known to be a powerful catalyst. The similarities with sustainability are several.

Sustainable development aims at long-term conservation of the water, earth and ecosystem productivity and to reduce negative impacts on nature and human health. Through the efficient use of resources, the loading on the Earth’s limited resources is reduced. For any company, this will be a profitable equation as sustainability lowers its production costs and increase margins. Global consulting firm Accenture together with the United Nations recently conducted a global survey of business executives that indicates that the majority of respondents believe that sustainability issues are important for business growth and competitiveness. Companies that in a proactive manner include sustainability in their core processes are also the most successful and competitive. The link between sustainability and risk management may not be obvious to all. But as risk management aims to limit the likelihood of unforeseen and unnecessary costs such as personal injury, quality defects, production disruptions and environmental damage, it also contributes to unnecessary use of the Earth’s resources. By coordinating sustainability and risk management it increases the legitimacy of both processes, and they can also be operated at a lower cost.