ESG-related risks present even greater challenges to established risk management frameworks such as COSO because ESG risks are generally not well known to the business and include ‘black swans’ or other unforeseen events that can challenge the entities’ short-term or long-term performance or even survival; tend to be longer term in nature than the timeline with which strategy is set or risks have been considered historically; and beyond the scope of any one entity.
In an article for Journal of Risk Management in Financial Institutions, Partner Johnny Frank shares the good news that FIs’ existing — and often highly sophisticated risk, compliance and legal functions (Risk Team) — are well equipped to integrate and mitigate these significant ESG-related risks into the FI’s risk management framework.
