3-16. The Position of EHS in Corporate Risk Management

In enterprise risk management, EHS (Environment, Health and Safety) holds a crucial position. Violations of environmental regulations and the occurrence of occupational accidents are not limited to mere penalties and damages; they can lead to severe business risks such as loss of corporate credibility, a drop in stock price, and termination of business relationships. Therefore, it is essential to view EHS as an integral part of strategic risk management for sustainable growth.

1. EHS Issues as Business Risks

Three types of risks exist in the EHS field: legal and regulatory risks, accident and disaster risks, and reputational risks. Violations of environmental laws and improper management of hazardous substances can lead to fines and operational shutdowns, while occupational accidents can result in compensation payments and loss of workforce. Additionally, reputational damage, which can spread instantly via social media, can harm a company's brand in a short period. All of these are major risks that directly impact business operations.

2. Integration of EHS into the Risk Management Framework

Global corporations position EHS as a key category alongside financial risks and supply chain risks. It is common practice to incorporate EHS into risk management frameworks like ISO 31000 and use a risk matrix to evaluate the frequency and impact of such events. By quantitatively assessing EHS risks, management can reflect these findings in their investment decisions and strategy formulation.

3. Management's Responsibility and Accountability

From a business risk management perspective, EHS should be a topic regularly reported to the board of directors and at management meetings. Especially when serious accidents or regulatory violations occur, management must be accountable to investors, government agencies, and the media. Insufficient commitment from top management can be evaluated as a lack of governance, leading to a loss of trust from shareholders.

4. Supply Chain and EHS Risks

Business risks are not limited to a company's own operations; EHS violations by suppliers also pose a significant threat. There have been cases where a client company was held accountable for a supplier's reported use of child labor or environmental pollution, leading to the termination of business relationships or boycotts. Therefore, it is crucial to include EHS standards in procurement policies and mitigate risks through audits and training.

5. EHS Risk Management to Enhance Corporate Value

Integrating EHS as a core business risk is not just about avoiding risks; it also leads to an increase in corporate value. Proactive investment in environmental measures can result in energy savings and cost reductions, while a strong safety culture boosts employee engagement. These factors enhance a company's standing with ESG (Environmental, Social, and Governance) investors and directly contribute to strengthening its capital-raising capabilities.

Conclusion

The role of EHS in business risk management is becoming increasingly important. Beyond mere legal compliance and accident prevention, it is a business issue that directly affects a company's brand and its reputation among investors. Viewing it as a pillar of strategic risk management is the key to sustainable growth.