EHS management blog


5 Reasons Why EHS Risk Management is Important

Organizations today operate in an increasingly uncertain environment, and one that's not very forgiving of mistakes.

Their survival depends on the ability to anticipate and react to possible issues and inefficiencies right away — rather than at the end of the reporting period.

It's why so many organizations are turning their attention to EHS risk management. After all, what better way to get ahead than by responding to threats and opportunities before they even occur?

In this article, we'll take a look at some of the reasons EHS risk management matters more than ever. 

Why is EHS risk management important?

EHS risk management is important because it’s key to predicting and preventing unwanted events. It helps organizations make smarter decisions to lower their operational costs. It also helps organizations adapt quickly to changing circumstances and take advantage of new opportunities. Risk management is at the center of any effective EHS program.

Here are 5 reasons EHS risk management is so valuable:

  1. Risk management helps you uncover “hidden risks” in your organization.
  2. Preventing unwanted events is cheaper than responding to them.
  3. Risk management helps you make the most of limited resources.
  4. Sound risk management keeps shareholders happy.
  5. Managing risks gives you a competitive advantage.

Let’s dive deeper into each of these reasons below.

1. Risk management helps you uncover “hidden risks” in your organization.

If you’re focusing only on accidents that have already occurred, you may be distracting yourself from what’s most important.

Traditionally, EHS efforts have relied on past performance metrics like accidents, injuries, and days away from work. But that approach creates a major blind spot.

By contrast, risk management asks questions about what might happen in the future, like:

  • What are the top threats to our organization?
  • How likely are they to occur, and how severe is their impact?
  • Are we prepared to respond to unforeseen events?

Asking these questions can help you identify problems you might otherwise have overlooked.

2. Preventing unwanted events is cheaper than responding to them.

As a car owner, you wouldn’t wait until your engine seized up to change your oil. Spending a little money on preventive maintenance now can help you avoid expensive repair bills down the road.

Similarly, it doesn’t make sense to wait until an employee gets hurt to put hazard controls in place.

Consider this: A single injury costs an organization on average $32,000 while the cost of a fatality is $1.42 million, according to the National Safety Council. The costs associated with a spill or environmental violation can easily exceed those amounts.

It’s much more cost-effective to identify risks and prevent them from causing an accident in the first place.

3. Risk management helps you make the most of limited resources.

In a perfect world, we’d all have an unlimited budget for safety and environmental initiatives. Yet, we know that a lack of funding is a real problem for most EHS departments. To make the most of your budget and personnel, you need to know which issues to prioritize.

One way to do that is by using risk scoring. Risk scoring is the process of assigning a numerical value to each risk you identify based on its severity and the likelihood it will occur. By comparing scores for different risks, you’re able to see which risks are most serious and allocate resources to those first.

4. Sound risk management keeps shareholders happy.

If shareholders haven’t asked what you’re doing to prepare for the unknown, expect to hear that this year.

It’s something we’ve been seeing for a while: More shareholders are leveraging their stock options to demand greater transparency and accountability. They’re asking questions about how companies are preparing for climate change, minimizing carbon emissions, and reducing their dependency on fossil fuels.

By proactively preparing to meet these risks, organizations can lower costs, improve returns, and increase investor confidence.

5. Managing risks gives you a competitive advantage.

All businesses face some degree of risk. Although some risks can cause accidents and injuries, others are actually helpful.

For example, climate change has created many negative risks for companies — such as the risk of damage from severe weather or natural disasters. However, it has also created opportunities for companies to sell new products, or lower costs by using alternative energy sources.

Companies that practice proactive risk management are able to discern and capitalize on these opportunities long before their competition.

Your takeaway

It’s clear that an effective EHS risk management program can help your organization succeed. If you are curious and want to learn more, read this next post on how to survive the shift from compliance to risk.

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