When asked to define the significance of his students' existence in this vast universe, a teacher replied that it was the recognition of the interdependencies of the smaller elements in life that give meaning to the bigger universe around us. And true interdependence can only be realized by looking at the universe from the outside in, not the inside out.
Environmental Health and Safety (EHS) professionals have long looked at corporate risk from the inside out perspective. Yet, as this article demonstrates, an outside in approach allows the corporate risk framework to be dissected into simpler layers.
Intrinsic to corporate risk, EHS should be an important component of the organization-wide risk management framework. Yet, without an approach for integrating EHS risk elements into the larger corporate risk perspective, we typically fail to leverage the increased shareholder value EHS creates in the business. In large part, EHS risk is still considered as a lagging influencer, meaning that our experience and insight is sought after an event has occurred – our role is to react. By taking deliberate action to shift our role and become a leading influencer, we gain opportunities – much like a leading indicator – to make strategic choices that proactively shape future events.
As EHS professionals, we are responsible for raising awareness of our critical role in driving effective risk management frameworks. Our daily decisions and actions to contain, minimize or eliminate health and safety risks directly affect the financial bottom line. We touch every facet of corporate America – from production lines to credit lines, from boiler rooms to boardrooms. Yet, we still fail to have an appropriate voice in developing the right risk management strategies, meaning our contribution to those risk frameworks is seldom recognized until a catastrophic incident occurs.
So, how do we begin to look at the economics of risks with EHS as a leading influencer? How can we influence the corporate risk paradigm?
The first step is understanding where we fit within the corporate risk hierarchy. In a traditional model, corporate risk looks to manage any losses resulting from inadequate or failed internal processes, people and systems or from external events – with a focus on financial or operational risks. Traditional EHS risk is defined as the probability and magnitude of harm or loss from an undesired event that affects people, processes and the environment. Those traditional definitions underscore that all risk frameworks have three things in common: people, processes and systems (environments). And since risk is inherent in everything we do, the success of all risk-related frameworks hinges on an organization's ability to proactively identify potential failure and preemptively contain it, if necessary. In EHS, proactive preemption is how we anticipate, recognize, evaluate and control risk factors.
When we dissect a typical corporate risk framework, we find several other key elements play important roles. Although these elements are seldom highlighted, their inclusion is taken for granted when we talk about corporate risk frameworks.