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The role of risk management in sustainability efforts

By analyzing data points from consumers, employees, the economy, and more, companies can use the information to chart out possible risks in the future.

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While risk management may once have been relegated to a single employee at a company, in our technology-focused world today, it is a vital tool for all business leaders to have.

Risk management means using data about potential risks that can affect a business, positively or negatively, to create plans to mitigate and manage those risks.

"If you’re really interested in managing your risks in the future, think about risks to your business over the next few years with risk management, then pay attention to things that are longer-term," said Mark Beasley, accounting professor at North Carolina State University’s Poole College of Management and director of the school’s Enterprise Risk Management Initiative.

Enterprise risk management plays into many aspects of business, including sustainability. The Poole College of Management has created a master’s of management program with a risk and analytics concentration that provides training in risk and bridges it to sustainability.

"Sustainability isn’t just about the environment," said Heather Daniels, Lockheed Martin Corporation’s director of enterprise risk and sustainability. "That’s a huge piece of it, but it’s also a resilience of the corporation to multiple factors. It’s our human capital and the diversity programs, it’s the governance structure of the corporation — it’s more long-term focused. What are we doing today to position for the ongoing resilience of the corporation and its products and services?"

Many companies are looking at a big picture of sustainability that covers three parts: the environment, social issues and governance, or ESG.

"ESG is becoming a buzz term to say that entities need to be thinking not only about climate change, water and natural resources but social, which gets into the people dimension," said Beasley. "How are we impacting people? How is our product potentially helping communities, however that may be, or hurting?"

Risk management and sustainability efforts pair together well. Enterprise risk management often looks at risks facing a company in the next one to five years, and those same tools can be used to look at the longer-term to bolster sustainability.

Lockheed Martin Corporation is one entity that is bringing risk management and sustainability together.

"What’s really been achieved is the look at risk in what were traditionally two different lenses: risk more short-term, looking at program and business disruption, and sustainability more of a longer-term lens, looking at sustainability overall," said Daniels. "That’s one of the strongest things we’ve been able to achieve by bringing the two functions closely together. Because you have the two perspectives closely aligned, you look at shared tools, processes and evaluation. Through that synergy, it brings further, richer analysis around those kinds of risks."

Companies looking at environmental sustainability will benefit not only stockholders but stakeholders, said Beasley.

"How is your company affecting society?" said Beasley. "You have an obligation to society to not destroy natural resources, to not take advantage of people or groups."

Benefiting the earth in turn helps the business.

"We could look at it selfishly —like if you don’t buy into sustainability or you don’t believe in it you won’t do as well," said Beasley. "But if your customers believe in it, you’d better. They’re going to buy products they think are more sustainable, for example. If you don’t buy into it, your business could be affected. It’s in your best interest to pay attention."

That’s why the Poole College of Management has created a master’s of management program with a risk and analytics concentration that provides training in risk and bridges it to sustainability. Led by instructors with real-world experience, the program is Poole College’s latest initiative to meet the needs of businesses. Graduates have found success in everything from small startups to Fortune 500 companies.

The graduate program is offered asynchronously online on a part-time basis, so students can participate from anywhere in the world.

"We’re arguing that risk management skills are becoming an expected core competency for any business leader," said Beasley. "A sustainability concept is also becoming a core competency. So, we’re going to put those together. Our program is going to give students tools in their toolkit to really have skills the talent marketplace is going to expect them to have if they’re going to be in a leadership role."


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