Effective risk management balances risk exposures, benefits and expenditures. Establishing robust environmental, social and governance (ESG) risk management capability is necessary for organizations to assess and address the impact of ESG risks on business strategy and objectives. With the link between ESG factors and enterprise risk management (ERM) becoming increasingly explicit, organizations must find ways to examine business vulnerabilities towards a wider and more diverse range of risks.

ESG-related risks can be challenging to identify, assess and prioritize. By their nature, the financial and business implications of ESG risks may not be immediately clear or easily measurable. This challenge may be exacerbated by a company’s limited knowledge of ESG risks, varying risk emergence periods relative to financial or operational risks and difficulties related to quantifying risks and assessing outcomes.