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Integrating a risk management & assurance process into environmental management

By Michael Vincent

26 December, 2006

Over the last few months various issues involving the future of the risk profession have been discussed and challenges issued for commitment for the changes that will occur in the years ahead.  This month however it is time to visit another student who has completed his project.

Claudio Senese works for Telstra and his area of interest is the risk management of environmental factors.   His dissertation involved the melding of risk management and assurance with the process of environmental management.  His conclusions were as follows.

Since the early 1970's, the environmental agenda has become an increasingly important issue for all large corporations to manage.  Although the extent of the environmental management deployed by one company compared to the next depends of the nature of their respective businesses, the necessity to incorporate environmental management as part of the strategic planning process is now relevant and common to all.

These days the environmental agenda has matured and now extends beyond environmental compliance into business opportunity, which has demanded more sophisticated process linkages being implemented by companies.

Assurance for a company's senior team that its environmental management will achieve the desired outputs requires the inherent risks and potential impacts both internal and external be considered effectively.  In addition a realisation that limitations in planning may significantly undermine the effectiveness and efficiency of the environmental policy. Some of these limitations are:

1. Not recognising the sensitivities in the implementation of environmental programs

2. Neglecting potential root causes behind the risks and failing to design prevention controls.

3. Remaining reactive to new or emerging environmental issues rather than adopting a proactive stance

4. Being unable to seize business opportunities through environmental initiatives

Overall environmental managers need to recognise that risk to effective environmental management not only like in the design controls to minimize environmental impairment or to achieve compliance.  Risks to effective environmental performance can also arise from other areas including:

1. Quality and skill base of staff

2. Financial and budgetary constraints

3. Environmental team reputation

4. Internal customer relationships

5. The disposition of company and its staff

6. The ability to forecast and timing

7. Legislation and regulatory requirements

8. Emerging global factors

The threats that can emerge from these areas, which may significantly affect the performance of environmental management, can be quiet obscured or hidden within the day-to-day activities and pressures on a company.  However adopting the risk management approach that emphasises key objectives can help draw out the real root causes and impact of risk on achieving the corporate objectives.

An effective environmental team can leverage from risk management techniques to fully assess the imperatives of the environmental agenda, identify and assess the relationship to a company's overall business objectives and provide greater assurance to the company's senior management.  This will result in the senior management team becoming advocates for the environmental agenda rather than opponents.

Accordingly the outputs of the environment team supports the company's key objectives and in so doing provide real value added to the activities of the business.

About the Authors

Australasian Risk Management Unit

Faculty of Business and Economics