The effective management of environmental risks is being hampered by a
lack of certainty about the impact of environmental liabilities and slow
progress on international regulatory harmonisation, according to the
latest research amongst senior risk managers by the Economist
Intelligence Unit (EIU), co-sponsored by insurer ACE (NYSE:ACE).
The survey of 320 senior global executives revealed that environmental
risk management has been neglected by many, with 43% of respondents
saying that they either managed it in an ad hoc manner or not at all.
According to ACE, this suggests that despite media, investor and
regulatory scrutiny of businesses’ performance
in this area, environmental risk has not yet become part and parcel of
the main risk management agenda.
When asked about the main areas hindering their ability to manage this
category of risk, 35% cited the lack of certainty regarding the impact
of environmental liabilities and 34% said the lack of international
regulatory harmonisation was the main issue.
Nearly half of respondents felt the ability to comply with legislation
and identify environmental liabilities were major strengths in managing
environmental risks. However, only 41% felt they accurately assessed the
scale and scope of these liabilities and only a third felt they
successfully made decisions on whether to absorb the risks or transfer
them. Both findings highlight the challenges businesses face in
quantifying the true extent of environmental risks.
Commenting on the survey results Wayne Harrington, ACE’s
Environmental Risk Manager – UK & Ireland,
said: “The findings are a wakeup call to
organisations to act now to include environmental risks as part of their
overall risk framework. Insurance can play an important role in
protecting them but, to ensure it is applied to optimum effectiveness,
risk managers must first ensure that their risk assessment procedures
and reporting lines are clear and robust.”
Confusion also exists within organisations as to who carries ultimate
responsibility for environmental risk management. A quarter of
respondents said that the chief executive officer is responsible and one
in five attributed responsibility to the chief risk officer. Within the
other organisations surveyed, however, ownership of this discipline was
widely dispersed and often at sub-board level. In 14 per cent of
organisations questioned, no-one had overall responsibility.
The survey also explored the importance attached to environmental risk
in a range of strategic business activities. The results showed a
surprisingly low level of consideration given the potential scale of the
liabilities. Just 41% said that they conducted an environmental
assessment when developing new products or services; 32% when selecting
partners or suppliers; 26% when planning geographical expansion and only
19% when planning mergers and acquisitions.
Harrington commented: “The responses to these
specific questions reveal that the management of environmental risks
remains fragmented. Companies will find it difficult to obtain an
overall picture of the risks they face while it is managed in a
decentralised way. "
While the survey highlights the challenges many organisations face in
getting to grips with environmental risk, there is evidence that many
see clear opportunities from improved performance in this area. Almost
six out of ten cited an enhanced reputation with customers as the key
benefit, ahead of a better reputation with investors which was cited by
30%.
Harrington concluded: “Environmental risk
management is set to rise up the corporate agenda as concerns about
climate change, compliance with developing legislation and the overall
impact of business on the wider environment increase. While these offer
huge challenges to organisations across Europe, they also deliver
opportunities both in terms of enhanced reputation and customer
satisfaction for those that address the issue. The insurance sector is
well placed to play a strategic role in terms of the development of
products and services to help deal with these risks effectively.”
The complete report: “Under the spotlight: The
transition of environmental risk management”
and others in the series, can be downloaded here:
http://www.aceeuropeangroup.com/AceEuropeRoot/Media+Centre/
Research/EIU+Survey/default.htm
(Due to its length, this URL may need to be copied/pasted into your
Internet browser's address field. Remove the extra space if one exists.)
Notes to editors:
The EIU research
The Economist Intelligence Unit surveyed 320 executives around the world
in March 2008 about their attitudes to environmental risk management.
The survey was sponsored by ACE, KPMG, SAP and Towers Perrin.
Respondents represent a wide range of industries and regions, with
roughly one-third each from Asia and Australasia, North America and
Western Europe. Approximately 50% of respondents represent businesses
with annual revenue of more than US$500m. All respondents have influence
over, or responsibility for, strategic decisions on risk management at
their companies.
ACE
ACE European Group has established branch offices in 19 countries across
Europe, Freedom of Services permission to provide insurance services to
clients in 30 European countries and affiliates in Egypt, Bahrain,
Pakistan, Russia and South Africa.
Part of the ACE Group of Companies, ACE European Group comprises the
operations of ACE Europe, ACE Global Markets and ACE Tempest Re Group.
ACE Europe provides a range of tailored Property and Casualty, Accident
and Health and Personal Lines solutions for a diverse range of clients.
ACE Global Markets (AGM) is ACE’s specialty
international business, underwriting through ACE’s
Lloyd’s Syndicate 2488 and ACE European Group
Limited. Specialty lines include excess and surplus lines business,
Marine, Aviation, Energy and Political Risk as well as Property,
Financial Lines and Accident and Health. Additional information on ACE
European Group can be found at www.aceeuropeangroup.com.
The ACE Group of Companies is a global leader in insurance and
reinsurance serving a diverse group of clients. Headed by ACE Limited
(NYSE: ACE), a component of the Standard & Poor’s
500 stock index, the ACE Group conducts its business on a worldwide
basis with operating subsidiaries in more than 50 countries. Additional
information can be found at: www.acelimited.com
|