- Integrating ESG into risk management is crucial to anticipate emerging risks, meet stakeholder expectations, and protect long-term business resilience.
- The approach brings new risks into a unified scope such as climate change, natural resource depletion, and human rights.
- APRIL has created a new governance structure to enable a more holistic approach to managing operational and strategic risks.
APRIL has upgraded the way the company manages risk, to incorporate a host of environmental, social and governance (ESG)-related factors such as climate change and human rights.
The initiative was launched in response to the growing recognition that sustainability-related risks could have an increasing impact on APRIL’s business. Incorporating them into the company’s existing Enterprise Risk Management (ERM) system required an extensive project, involving deeper collaboration between the company’s ERM and Sustainability teams.
That enhanced collaboration has allowed the business to connect the dots between immediate operational risks such as flooding events and fires, to place them within broader environmental trends. The expanded approach has also explicitly brought new risks into a unified scope such as natural resource depletion, and human rights.
At the same time, a new governance structure has been created to enable a more holistic approach to managing operational and strategic risks. That has helped to allow managers to analyse the connections between different risks and the impact they might have on other parts of the business.
For the first time this year as part of a strategic review of enterprise-level risks, the company disclosed the 11 top risks assessed as having high likelihood of occurrence or a significant potential impact. The list, which was published in the 2024 Sustainability Report covers everything from the impact of climate change and ecosystem degradation to regulatory uncertainty and talent retention.
Preparing for Grey Rhinos
Prior to the introduction of this updated approach, APRIL has operated an Enterprise Risk Management system running on an annual cycle. At the beginning of each year, risk assessments for the following year are started with the ERM team, working closely with operational teams to identify specific risks and develop mitigation measures.
The risks they must consider cover everything from a cyber-attack to a power-boiler explosion. Geopolitical risks are also in scope, but these impacts can be hard to predict. For example, the current global trade complexities are leading to more within-Asia trade, meaning that there is a shortage of shipping containers for transporting goods, making it harder to get products out to customers.
Another vital component of the ERM team’s work is facilitating detailed plans that the organisation can follow if mitigation fails and a risk materialises. These Business Continuity Plans (BCPs) provide a guide for dealing with a potential crisis such as extreme flooding on the main road to the port which disrupts operations and product distribution. But crucially, they do not just cover the immediate aftermath, they also work through how to get the business back up and running quickly.
The ERM team’s job is to prioritise and plan for so-called “grey rhino” risks, said Ian Wevell, Corporate Enterprise Risk Manager. These are high likelihood events that have a high impact on the business — so-called because they are obvious and visible but often ignored. When risks manifest, these plans are reviewed to assess how well they performed.
Future-gazing
The motivation behind incorporating ESG-related risks more comprehensively was in part to ensure that existing risks such as flooding are understood within the context of climate change. That is a key recommendation of the Task Force on Climate-related Financial Disclosures, a framework established to help companies disclose how climate change is impacting their business and financial planning.
“The process involved combining sophisticated climate modelling with detailed maps of the topography of operational areas and individual observations from staff on the ground to understand how and where climate-related risks are projected to get worse,” Wevell said.
That allows the company to approach those risks more strategically and inform the development of a climate adaptation plan. For example, instead of carrying out annual running repairs on a stretch of road that floods regularly, a climate-informed view might support investing in a structural upgrade to the hotspots on the route while securing alternative routes. The company can also prepare for the projected temperature increases which will impact outdoor workers at the plantations by adapting work procedures and providing protective gear.
This long-term approach also informs the company’s research priorities. The R&D team is constantly working to improve the genetic stock of the Eucalyptus and Acacia trees used in the plantations.
The goal is to produce seedlings that are well-matched with the local conditions at plantation sites and able to withstand environmental and disease stress. By taking future climate risk into account, the team knows that increasingly, the trees will need to be tolerant of higher temperatures, more frequent flooding and high-wind events.
Broadening the scope of APRIL’s approach to risk management has made the company more resilient and adaptable in a highly changeable and uncertain business environment.
“We are better able to manage long-term strategic risks and understand how risk can have knock-on effects within the business,” said Wevell.
The company’s approach was recognized recently at the ASEAN Risk Awards where it picked up the top prize in two categories. One of those was specifically for the teams’ work on ESG-related risks. The judges determined that APRIL had, “demonstrated exceptional proficiency in integrating environmental and social considerations into their risk management strategies.”
