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Risk factors covered in risk management
Updated over 2 months ago

The risk management feature covers environmental, social and governance related risk factors. A company's success depends heavily on the consideration of ESG factors. More clients, employees, investors and regulators are demanding companies to evaluate how their business affects both the environment and society, and to conduct themselves.

Those risk factors have been concluded from multiple sources such as the OECD sector risks, the BAFA guidelines, UNECE, IFRS, Green Button and other ESG standards. Those are listed in the table below.

Social Risk Factors

Risk Factor

Description

Child Labour

Analyzing the risk factor of child labor involves examining its prevalence, affected demographics, and concentration in certain industries. It delves into root causes like poverty, lack of education, and weak labor regulations, alongside the impact on children's health, education, and development. The role of legal frameworks in prevention and the effectiveness of existing policies and interventions are also scrutinized.

Discriminatory Harassment

Analyzing the risk factor of discriminatory harassment involves examining its forms, prevalence, and impact on victims, alongside the effectiveness of legal, policy, and intervention strategies. It entails understanding how harassment, motivated by discrimination against race, gender, sexual orientation, or other characteristics, affects individuals psychologically and physically, and its broader societal consequences. The analysis also considers cultural norms, institutional responses, and the role of education in perpetuating or mitigating harassment.

Forced Labour

Analyzing the risk factor of forced labor involves examining the prevalence and mechanisms of coercion that trap individuals in work against their will, often under threat of punishment. This includes identifying vulnerable populations, such as migrants or those in debt bondage, and the industries most implicated. The analysis also considers the legal and regulatory frameworks in place to combat forced labor, their enforcement effectiveness, and the role of international cooperation. Additionally, it assesses the impact of forced labor on victims, including physical and psychological harm, and explores the economic incentives that perpetuate this exploitation.

Working Time

Analyzing the risk factor of working time involves evaluating the duration, flexibility, and scheduling of work hours to identify their impact on employees' health, well-being, and work-life balance. It includes assessing the prevalence of long working hours, shift work, irregular hours, and the absence of rest breaks or days off. The analysis also considers how excessive or poorly designed working time arrangements can lead to physical and mental health issues, reduced productivity, and higher rates of accidents and injuries. Additionally, it explores the effectiveness of regulatory frameworks, organizational policies, and interventions aimed at promoting healthier work-time arrangements and ensuring compliance with labor standards.

Occupational Health and Safety

Analyzing the risk factor of occupational health and safety involves assessing workplace conditions and practices that can lead to accidents, injuries, or illnesses among employees. This includes examining the presence of physical hazards (such as machinery, toxic substances, and ergonomic risks), biological hazards (like exposure to infectious diseases), and psychosocial risks (including stress, harassment, and long working hours). The analysis also reviews the adequacy of safety training, the use of protective equipment, the implementation of safety protocols, and emergency response plans. Additionally, it considers the effectiveness of regulatory compliance and enforcement, as well as the role of workplace safety culture in preventing accidents and promoting health.

Trade Unions and Collective Bargaining

Analyzing the risk factor of Trade Unions and Collective Bargaining involves evaluating the extent to which workers have the right to organize and negotiate their working conditions collectively. This includes examining the presence and strength of trade unions, the legal framework supporting or hindering union activities, and the prevalence of collective bargaining agreements. Additionally, the analysis considers the impact of union representation on workers' rights, wages, working conditions, and workplace safety. It also assesses challenges faced by unions, such as restrictions on union formation, anti-union policies by employers, and the shifting landscape of labor due to globalization and technological changes.

Wages

Analyzing the risk factor of wages involves assessing the adequacy, equity, and competitiveness of employee compensation within an organization, industry, or economy. This includes evaluating minimum wage compliance, the presence of wage disparities based on gender, race, or other discriminatory factors, and the alignment of wages with living costs and productivity levels. The analysis also considers the impact of wages on employee motivation, retention, and overall well-being, as well as on organizational performance and economic inequality. Additionally, the role of wage policies, negotiation mechanisms, and labor market regulations in shaping wage structures is examined.

Environmental Risk Factors

Risk Factor

Description

Hazardous Chemicals

Analyzing the risk factor of hazardous chemicals involves assessing the exposure, management, and regulatory compliance related to the use, storage, and disposal of chemicals that pose risks to health and the environment. This includes examining the identification and classification of hazardous substances, the effectiveness of safety protocols and protective measures for workers and communities, and the impact of chemical accidents and leaks. The analysis also reviews the adequacy of legal frameworks and enforcement mechanisms to ensure safe handling and reporting of hazardous chemicals. Additionally, it considers the responsibilities of businesses in implementing risk management strategies and the role of public awareness and education in preventing chemical-related hazards

Water

Analyzing the risk factor of water involves evaluating the availability, quality, and management of water resources to assess their impact on human health, economic development, and environmental sustainability. This includes examining issues such as water scarcity, pollution, access to safe drinking water, and the effects of climate change on water resources. The analysis also considers the effectiveness of water governance policies, infrastructure for water supply and sanitation, and practices for water conservation and sustainable use. Additionally, it explores the implications of water-related risks on agriculture, industry, and urban development.

Climate Change Impacts

Analyzing the risk factor of climate change impacts involves assessing the wide-ranging effects of global warming and climate variability on the environment, human societies, and economies. This includes examining the frequency and severity of extreme weather events (such as hurricanes, floods, droughts, and heatwaves), the degradation of ecosystems, loss of biodiversity, and the resultant challenges to food security, water resources, and health. The analysis also considers the vulnerability and adaptive capacity of different regions and communities, especially those most at risk. Additionally, it reviews the effectiveness of mitigation and adaptation strategies, policies, and international agreements aimed at reducing greenhouse gas emissions and enhancing resilience to climate change impacts.

Air Pollution

Analyzing the risk factor of air pollution involves evaluating the sources, composition, and concentration of harmful pollutants in the atmosphere and their impact on human health, environmental quality, and climate change. This includes assessing emissions from industrial activities, transportation, agriculture, and residential heating, alongside the presence of particulate matter, nitrogen oxides, sulfur dioxide, and volatile organic compounds. The analysis also reviews the effectiveness of air quality regulations, monitoring systems, and pollution control technologies in mitigating air pollution. Additionally, it considers the health outcomes associated with air pollution exposure, such as respiratory and cardiovascular diseases, and the broader ecological effects, including ecosystem degradation and contribution to global warming.

Waste

Analyzing the risk factor of waste involves evaluating the generation, management, and disposal practices of solid and hazardous waste and their impacts on human health, environmental sustainability, and economic efficiency. This includes examining the sources and types of waste, such as municipal, industrial, electronic, and medical waste, and the effectiveness of waste reduction, recycling, and disposal methods. The analysis also considers the regulatory frameworks governing waste management, the capacity and technology for waste treatment, and the challenges and opportunities in waste recovery and circular economy initiatives. Additionally, it assesses the risks associated with inadequate waste management, including pollution, greenhouse gas emissions, and public health issues.

Biodiversity

Analyzing the risk factor of biodiversity involves evaluating the health and stability of ecosystems through the diversity of species, genetic variation, and ecosystem functions. This includes assessing threats to biodiversity such as habitat destruction, climate change, pollution, invasive species, and overexploitation of resources. The analysis also examines the effectiveness of conservation strategies, protected areas, and sustainable management practices in preserving biodiversity. Additionally, it considers the importance of biodiversity for ecosystem services that support human well-being, such as pollination, water purification, and disease regulation.

Animal Welfare

Analyzing the risk factor of animal welfare involves evaluating the treatment and living conditions of animals in various settings, including agriculture, research, zoos, and households. This includes assessing practices related to housing, feeding, handling, and healthcare to ensure they meet ethical and welfare standards that prevent suffering and promote the well-being of animals. The analysis also reviews the regulatory frameworks and enforcement mechanisms governing animal welfare, as well as the impact of public awareness and consumer demand for ethically produced products on animal treatment. Additionally, it considers the broader implications of animal welfare on public health, environmental sustainability, and social ethics.

Physical Exposure

Analyzing the risk factor of physical exposure involves evaluating the extent and impact of individuals' exposure to physical hazards in their environment or workplace. This includes assessing exposure to extreme temperatures, noise, radiation, vibration, and ergonomic risks that can lead to health issues like hearing loss, musculoskeletal disorders, skin conditions, or radiation sickness. The analysis also reviews the effectiveness of protective measures, safety protocols, and regulatory compliance aimed at minimizing these risks. Additionally, it considers the role of occupational health programs and public health initiatives in monitoring, managing, and mitigating the effects of physical exposure.

Governance Risk Factors

Risk Factor

Description

Irresponsible Business Conduct

Analyzing the risk factor of irresponsible business conduct involves assessing corporate practices that negatively impact stakeholders, the environment, and society at large. This includes evaluating companies' adherence to ethical standards, labor rights, environmental protections, and anti-corruption laws. The analysis also reviews the effectiveness of corporate governance structures, transparency in operations, and engagement with communities and stakeholders. Additionally, it considers the consequences of irresponsible behaviors, such as environmental degradation, exploitation of workers, and loss of public trust.

Brutal Security Forces

Analyzing the risk factor of brutal security forces involves evaluating the extent and nature of excessive force, human rights abuses, and misconduct by law enforcement, military, or private security personnel. This includes examining incidents of brutality, torture, unlawful detentions, and extrajudicial killings, alongside the mechanisms of accountability and oversight in place to prevent such abuses. The analysis also assesses the impact of these practices on public trust, social stability, and international relations. Furthermore, it considers the role of training, operational guidelines, and cultural factors within security forces that contribute to or mitigate against such behaviors.

Forced Evictions

Analyzing the risk factor of forced evictions involves examining the prevalence, causes, and consequences of involuntary removal of individuals or communities from their homes or land. This includes assessing the legal and regulatory frameworks governing evictions, the extent to which these practices respect human rights and due process, and the impact of evictions on affected populations, particularly in terms of homelessness, poverty, and social disintegration. The analysis also considers the motivations behind forced evictions, such as urban development projects, environmental conservation efforts, or conflict-related displacements, and evaluates the adequacy of compensation, resettlement support, and legal recourse available to those displaced.

Land Rights

Analyzing the risk factor of land rights involves assessing the security, legality, and fairness of land ownership and usage rights. This includes examining issues such as land tenure security, the impact of land grabbing, indigenous land rights, and conflicts over land use. The analysis also reviews the effectiveness of legal frameworks and governance structures in protecting land rights, especially for marginalized and vulnerable populations. Additionally, it considers the implications of land rights disputes on social stability, economic development, and environmental sustainability.

(Employment) Inequality

Analyzing the risk factor of employment inequality involves examining disparities in job access, quality, and remuneration among different groups based on gender, race, ethnicity, age, disability, or socioeconomic status. This includes assessing the distribution of employment opportunities, the prevalence of underemployment and precarious work, wage gaps, and barriers to career advancement. The analysis also explores systemic factors contributing to inequality, such as discrimination, educational disparities, and structural economic changes. Additionally, it reviews the effectiveness of policies and practices aimed at promoting workforce diversity, equal opportunity, and fair treatment.

Bribery and Corruption

Analyzing the risk factor of bribery and corruption involves evaluating the prevalence, forms, and impact of corrupt practices within organizations, industries, or governmental bodies. This includes examining the mechanisms through which bribery, embezzlement, fraud, and other forms of corruption occur, identifying vulnerable sectors and processes, and assessing the legal and regulatory frameworks in place to combat corruption. The analysis also considers the effectiveness of internal controls, compliance programs, and ethical standards in preventing corrupt practices. Additionally, it explores the broader economic, social, and political consequences of corruption, such as undermining trust in institutions, distorting markets, and hindering development.

Before starting with your risk management, make sure that you fulfill the pre-requirements.

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