An organization may face environmental risk factor. It could create barriers for the operation of that organization. This article will discuss briefly the environmental risk assessment for small business. By finishing this, you will be able to understand the risk, environmental risk, types of environmental factors associated with risk, and assessment of environmental risk.
5 Types of Environmental Risks and How to Assessment them?
Risk: The Risk is the probability of facing uncertainty which may result in possible loss of an organization. Risks associated with the small business can be managed following 5 Steps of Risk Management Process.
Definition of Environmental Risk: The probability or chance of suffering an adverse consequence, or the potential threats of negative effects on business operations and the business environment by flood, cyclone, tornado etc. arising from activities of organizations.
5 Types of Environmental Risks
Adopting environmental change: The future growth of any organization vastly dependent on many factors; and one of them is the adopting climate or environmental change. If an organization fails to adopt environmental changes, it surely a threat to that organization.
Pollution: Many new mills and manufacturing firms are being built and started producing goods and services for their customers. By using raw materials or chemicals, they gradually harm the natural environment. Water, air, and lands are being polluted and wasted permanently which are an incurable environmental risk for people and the organization.
Mismanagement of land and waterway: These are the most important elements for any business organization. And the land is one of the four factors that any organization needs as a price factor to establish its business. Unplanned and mismanagement of land and waterway will increase the potential threats for organizations.
Extreme weather: Population density was always important for any given area. Low population density is potentially always good for any environment because of fewer uses of natural energy and other resources. When the number of people starts living in a vulnerable area, the probability of damaging properties and lives are increased and it’s applicable for an organization as well.
Natural disaster: with the changes in climate, many countries are facing many types of natural disasters. Sometimes, they are extremely disastrous for a country. Though some organization can reap the benefit from a natural disaster, it’s only for a short period. The organization can face natural disasters like flood, cyclone etc.
Environmental Risk Assessment for Small Business
Risk assessment is simply the process of knowing the probability of happening a specific event and these events consequences. Environment uncertainty process has four steps.
Those steps are:
- Identifying the hazard or hazards,
- Assessing the consequences,
- Finding out the possibilities of happening these events, and
- Categorizing the risk and uncertainty.
Environmental Risk Assessing Steps Are Elaborated Below.
Step 01: Identifying: In this step, you find out the type of environmental risk your organization may face in future. For example, there is maybe a huge chance of occurring a natural disaster in a specific area. A natural disaster like flood could take place. This is a type of risk your organization may face.
Step 02: Assessment Of the Consequences: in this level, you assess the consequences of the natural disaster. A huge flood in a specific area could reduce the sales to an extremely low level in a specific area.
Step 03: Assessing The Probability: in this level, you find out the probability of occurring flood in that specific area.
Step 04: Risk Characterization: the last stage of the environmental risk assessment process. In this stage, the risks are ranked according to the severity and extent of their potential consequences.
Elaboration of the Environmental Risk Assessment Process
To keep a business safe from the bad effect of environmental problems, one should understand which type of risk is there. Identifying the risk will vastly reduce the probability of potential damage. Then the measurement of the consequence helps to understand the area of damage. Next, the probability calculation will help you to get an idea of how likely the incident may take place. Finally, ranking the total risks will help which step you should take to save your organization from damage.
Bottom Line
The risk will always be there for every kind of business organization. Environmental risk is one of the major risks. We cannot eliminate this risk, but we can assess the risk and reduce the chances of facing a financial loss by following those strategies.
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Sheikh Faizul Haque is an internet entrepreneur and the founder of The Strategy Watch; Graduated from North South University with a double major in Accounting & Finance in Bangladesh.
With a strong interest in developing and improving Business Strategy and to Conduct Business Analysis.