Our series on PESTLE risk monitoring concludes with an exploration of the “E” risk—Environmental—and the diverse ways in which it impacts organisations.
“Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.” Those words, spoken by President Theodore Roosevelt more than a century ago, still hold true today. But ‘control’ doesn’t equate to eliminating risk—an impossibility when it comes to many environmental risks that organisations face. Rather, risk management is about adapting dynamically as circumstances change. To achieve true resilience—for your supply chain and across the wider enterprise—your organisation needs targeted monitoring to help identify warning signs sooner.
In a broad sense, environmental risk can apply to all external factors that can potentially impact a business. In the context of PESTLE, however, environmental risks are more focused on the physical environment. Examples of environmental factors affecting business include:
Environmental regulations—The accelerating pace of climate change and the need to address pollution in emerging economies means that the regulatory environment is constantly evolving too. Organisations need visibility into legislative activities that are a precursor to laws that could increase risk exposure.
Sometimes, you can anticipate environmental risks without on-going monitoring. Climate is generally a known factor. For example, organisations looking to expand into the United Arab Emirates (UAE) are likely well-informed—and prepared—for the challenges that come from having operations in the hot, arid climate. Even weather-related events can be predictable; organisations with operations or suppliers in coastal areas understand they face a seasonal risk with disruptive potential and have action plans in place to address hurricane risk. However, as climate change progresses, known factors become less predictable. That’s where ongoing monitoring for environmental risk can help.
“The interconnected dynamics of geopolitics, technological advances, global economic integration, social instability, climate change and more means that the manifestation of one risk is increasingly likely to influence others,” notes the Brink news service on global risk. Expanding on the topic, Brink says that when a “known risk—hurricanes, for example—meets with an emerging risk—rising tides—the outcome is not easy to predict. Thus, anticipating emerging risks enhances the ability to predict potential outcomes when risks intersect.”
How do you gain the insight you need? A tool like LexisNexis® Entity Insight allows organisations to keep an eye on the PESTLE factors that are most relevant to the risks they face—be they Political, Economic, Socio-cultural, Technological, Legal, or Environmental. This tailored approach to monitoring helps eliminate information overload, enabling organisations to spot red flags sooner and respond proactively to reputational, regulatory, financial, and strategic risks.