The risk of environmental crises: a factor to be taken seriously

Many companies are not ready to deal with such emergencies because they do not even consider them a possibility.

When thinking about the structure of a company, it is common to visualise different teams or areas in charge of the essentials of running a company, such as accounting, human resources, production and even marketing. However, it seems that environmental risk assessment is something "optional", or reserved for only a few companies.

It is often said that "we are in compliance with the law" or "it won't happen to us". However, such a stance fails to seriously and objectively consider such risks, which can have severe consequences to the extent of calling into question the viability of the company. In addition to the financial risk, there is reputational and image damage that is sometimes irreparable.

There is no reason to expose the company when it can be avoided with proper planning and management. If this has not already been done, consider assessing environmental risks within the company's strategic planning and implement an environmental risk management program. This program should systematically identify, evaluate, quantify and prioritize the respective environmental risks of your business. Develop a risk reduction plan that follows the hierarchy: "eliminate, resolve or transfer".

All aspects of the business must be considered, including personnel, supply chain, product and customer operations. Below are some considerations to take into account when developing the plan:

• Lack of operating permits due to noncompliance with environmental regulations.
• Construction delays due to the discovery of unexpected contamination at the site.
• Disruption in the supply chain due to the unavailability of critical natural resources (e.g., certain woods, metals or chemicals).
• Reliability and cost of energy of different types (e.g., fossil fuels or renewables), its source (on-site generation utility), the method of distribution, and potential emissions (pollutants).
• Having to stop operations due to an accidental leak or spill.
• Lack of process water availability.
• Impact of climate on facilities (severe storms, floods, droughts, climate change).
• The legal risks of a toxic tort claim to third parties.

After assessing the risks and ranking them based on their impact and probability, you will have clarity on potential losses and can visualise the best options for dealing with eventualities. At the same time, your business can improve in terms of environmental footprint reduction, which is also favourable for your reputation in the market.

Excellent performance from an environmental perspective is not mutually exclusive to a successful business. Addressing the company's environmental risks and getting ahead of the issue with sound planning and management will avoid a potentially fatal threat and also position the company as one of the best in class.

For advice on insurance coverages that will allow you to complement your company's environmental risk management strategy, contact our experts.

Contact us through:

Daniel Ramos: daniel.ramos@fidex.com.mx

Fidex contact: +52 (81) 8133 6100

Bibliographic note: https://www.environmentalleader.com/2010/12/environmental-risks-the-hidden-danger-to-business/