Tackling Environmental Risk

In October 2007 the American Electric Power Co paid an out of court settlement of $4.6bn, plus a $15 million civil fine and $60 million in cleanup and mitigation costs, in relation to the damage caused by its emissions – the largest environmental settlement in US history*.  Earlier in 2007, Pine Garages Ltd of Beaconsfield, UK, was fined £4000 for fly tipping with costs of £995, and had their business name placed on Buckinghamshire County Council’s ‘Name and Shame’ website**. Two cases at opposite ends of the scale demonstrate that no business is too big, or too small, to discount the financial and reputational risks of committing an ‘enviro-crime’.

We are all increasingly conscious of the effect that our business (and indeed our personal) activities can have on the environment and the harm that can be caused to people, wildlife and public amenity. Understanding the impact on the environment of an organisation’s activities is now a concern not only for traditional industries well known for their direct environmental impact but also increasingly for those organisations that finance, or are in any other way connected with, their operations. Banks, for example, must today look not only at the financial, credit and liquidity risks of financing large scale developments but also at the social and environmental aspects of these projects that may damage their reputation by association. Recent years have seen a focus on prevention, as well as clean up (particularly as insurance has proved to be only a limited solution) with an emphasis on comprehensive and formal risk assessment and monitoring. Of course, maximum overall benefit will be obtained when environmental risks are considered in the context of the organisation’s overall risk management framework.

This important area of risk, and how it fits into an enterprise risk management approach, has now been recognised by IRM in the development of its qualifications. From October 2008 students will for the first time be able to take a specialist post-graduate level paper in environmental risk management, developed by a group of expert practitioners and academics. Students will learn about the concept of environmental risk and liability, the drivers of that risk, the role of the risk manager and the mitigation resources available to them, including the all important question of how to make best use of consultants and advisers. The new paper can be taken either as part of the International Diploma in Risk Management or as a standalone subject for those just wishing to develop their knowledge. The International Diploma was relaunched last year and all students must complete five core modules covering the essentials of risk management theory and practice but each student then has the opportunity to tailor the course to their own area of interest by selecting two specialist or technical subjects, now including environmental risk management. If environmental risk doesn’t do it for you then you can choose from a range of other specialisms including business continuity and crisis management, information risk, occupational safety and health or public sector risk management.

Carolyn Williams

Development Manager

The Institute of Risk Management

November 2008

This article first appeared in CIR Magazine

*Source: CBS News

**Source: Bucks County Council