Which risks should a business focus on?

The IPCC 2021 report on climate change makes for very sober reading. We are destroying the environments that support us, and we are doing it with increasing rapidity. Businesses must play a central role in at least slowing down this erosion and the closely related societal impacts.

Regulators around the world are looking at introducing Environmental and Social Governance (ESG), which will require businesses to report on the impacts they have on the environment and society – including risks. There are many different views of what ESG should look like. Hopefully these views will be reconciled before Greenland is completely green, and perhaps new regulations won’t be treated by companies as another administrative box-ticking exercise.

But if businesses adjust their strategic goals to maximize true wealth, meaning quality of life for all and for our descendants, as they currently do for profit, then we have a better chance. Those businesses will attract investment from institutional investors representing those who would like to live on a pleasant planet and would like that for their children and grandchildren, and people will want to be their employees and customers.

Then the question becomes – how does a business design its risk assessment and management methodology to balance the necessity of managing financial risks and opportunities alongside the risks and opportunities related to these other, rather more existential measures of collective quality of life for all? It requires a rethink of how we evaluate success and, by association, how we prioritize risks and their treatments. I will present some ideas on how this can be done.