Corporate Governance

Corporate sustainability through non-financial risk management

Anson Wong
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Anson Wong , (2014),"Corporate sustainability through non-financial risk management", Corporate Governance, Vol. 14 Iss 4
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 Corporate sustainability through
non-financial risk management
Anson Wong
Anson Wong is an
Assistant Director based
at the Research Centre
on Sustainable
Development, Cheung
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Kong Graduate School of
Business, Hong Kong.
Received 26 February 2013
Revised 26 February 2013
Accepted 1 November 2013
DOI 10.1108/CG-02-2013-0026
Abstract
Purpose – This paper aims at highlighting the significance in developing non-financial risk
management, emphasizing the need of managing environmental and social issues for enhancing
corporate sustainability. Particularly, through discussing the implications of non-financial risk
management, its benefits, opportunities and challenges will also be presented.
Design/methodology/approach – Drawing on authoritative academic literature, reports of
corporations’ studies, current articles and documents, the researcher has managed to examine and
construe the development and implications of non-financial risk management.
Findings – Several key findings are covered in this article. First of all, environmental and social
concerns are usually being deemed as intangible issues that need to be properly articulated and
managed by an effective non-financial risk management system for enhancing corporate sustainability.
Second, through different interpretations of sustainability, links could be drawn for highlighting the
significance of non-financial risk management and corporate sustainability. Third, by explaining the
impacts from non-financial risk management to sustainable development and profits, the article has
illustrated corporate sustainability as a clear business case for any corporation. Fourth, challenges are
also portrayed for the effective management of non-financial risk management by corporations. Finally,
and most importantly, the need of a systematic and strategic non-financial risk management system for
helping businesses to be more competitive, thus, moving closer to sustainable development, is
discussed in this paper.
Originality/value – The contribution of the article is thought to be significant. Although there exists a
wide body of research on sustainable development, risk management and corporate sustainability,
there is limited insight into how the corporations can effectively conceptualize such intangible or
non-financial risk in relation to sustainability. Integrating environmental and social risks is critical to the
effective management of any corporation’s real risks, and to improve resources allocation in a
sustainable fashion. This demands a systematic and strategic identification of issues through
non-financial risk management. Most significantly, this article has shown the way this can be achieved
by any corporation, and the concepts can be applied globally.
Keywords Sustainable development, Corporate sustainability, Environmental and social risks, Non-
financial risk management, Triple bottom line
Paper type Conceptual paper
Introduction
Many corporations already have tools to deal successfully with most of the traditional
financial risks in a business operation (Cleary and Malleret, 2007; Bischoff, 2008). However,
for most businesses, the introduction of non-financial risk such as environment and social
issues into the boardroom is one of the greatest corporate challenges of the new millennium
(Welford, 1999; PricewaterhouseCoopers, 2007).
In particular, the challenge is how to define and manage non-financial risk in their
operations effectively.
Discussion on sustainability in relation to risk management has emerged over the years.
Still, risk management in regards to non-financial risk has not been properly articulated or
defined and there exists a gap in academic research (Anderson and Anderson, 2009;
VOL. 14 NO. 4 2014, pp. 575-586, © Emerald Group Publishing Limited, ISSN 1472-0701 CORPORATE GOVERNANCE PAGE 575
 Hutton et al., 2007; Aras and Crowther, 2009; Galea, 2009). There exist only a few
systematic and strategic examinations in respect to the links between corporate
sustainability and risk management (Anderson, 2006; Fenner et al., 2006; Epstein, 2008;
Aras and Crowther, 2009).
Through illustrating the development of non-financial risk management, this article
examines the implications of non-financial risk management to corporate sustainability and
the opportunities that arise from the implementation of non-financial risk management.
Specifically, what needs to be examined is how non-financial risk or sustainability-related
issues will affect the corporation, with attention to the level of the impact these risks will
have on revenue, operations and strategies. While it is important to discuss and analyse the
benefits of non-financial risk management, challenges of establishing such a framework will
also be portrayed.

The development of non-financial risk management

In general, financial risk primarily involves “the business of being in business”, concerned
with maintaining profits, sustaining economic growth and protecting investments and
shareholder value from market fluctuations. These all typically fall under the domain of the
chief financial officer or chief risk officer.
Traditional risk management typically focuses on tangible uncertainties for which
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probabilities can easily be quantified (Joshi et al., 2005). One way to look at it could be
through Figure 1. The risk function in an organization has arisen as a buffer between
complicated financial engineering practices (such as using currency or credit derivatives
to manage exchange rate or credit risks) and the boardroom. Concepts such as “value at
risk” turn very complicated hedging positions into a single number that the chief financial
officer can check daily. Through the risk management process, the complexity has been
reduced to the benefit of ease of use and transparency. In the same way, non-financial risk
management could be viewed as the way to allow the boardroom (or other stakeholders
who need a simple transparent view of a company’s situation) to interface with the concept
of corporate sustainability.
On the whole, non-financial risk management mainly covers both environmental and social
concerns that relate to the sustainability of any organization (Mehta, 1997; Geczy et al.,

Figure 1 Risk management

Boardroom

Traditional Non-inancial
Risk Risk
Management Management

Financial Corporate
Engineering Sustainability

PAGE 576 CORPORATE GOVERNANCE VOL. 14 NO. 4 2014

 1999; Milne and Adler, 1999; Ritchie and Brindley, 2000; Solomon and Darby, 2005;
Morgera, 2007; Spedding and Rose, 2008). Referencing from the documents of the United
Nations Environment Programme’s (UNEP) Financial Initiatives (2003), for instance,
non-financial side of risk is essentially managing risk related to the issues of sustainable
development. Anderson and Anderson (2009) further argue that in addition to the traditional
bottom line, corporations are being pressured to address their environmental and social
responsibility performance, which are mostly of intangible or of non-financial nature.
From a sustainability perspective, the main benefit in non-financial risk management is its
ability to include a wider range of sustainability issues, environmental risks and social risks
into the corporate boardroom than merely corporate environmental management.
Additionally, such a framework is able to include the relevant probabilities of these
emerging risks into the company’s operating systems without which progress would be
lethargic at best (Bowden et al., 2001; Alijoyo, 2002; Epstein, 2008; Lundgren and
McMackin, 2004; Chester and Woofter, 2005; Koller, 2007).
Non-financial risk management is an essential measure for any business (Welford, 1999;
UNEP, 2003; Spedding and Rose, 2008; Anderson and Anderson, 2009). Society
increasingly demands that large multinational corporations improve their performance in
the areas of human rights, the environment, labour standards and other governance issues
(Schwartz and Gibb, 1999; Welford, 1999; Welford, 2000; Solomon and Darby, 2005;
Sapountzaki, 2007; Spedding and Rose, 2008). Businesses that fail to address the
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environmental and social outcomes of their operations may create significant risk to the
corporate sustainability (Epstein, 2008; Galea, 2009).
It is important to recognize that this incorporation of environmental and social aspects into
business also creates risks (Anderson and Anderson, 2009; Bischoff, 2008; Epstein, 2008;
Galea, 2009). But while non-financial risk could be viewed as irrelevant to the bottom line,
and its management an unnecessary cost or burden, companies should take note of the
upside of embracing non-financial risk management. Through identifying and managing
non-financial risks, new opportunities and solutions can be found; value can be added to
the business and further enhance the sustainability of the corporation (Anderson and
Anderson, 2006). The emergence of sustainable development as a core business issue for
many corporations worldwide should create many examples of the “upside” of
non-financial risk (Epstein, 2008; Aras and Crowther, 2009; Galea, 2009).
All of these factors suggest that the risk management of both financial and non-financial
items is becoming of equivalent strategic value for the global extended firms and, therefore,
must be mainstreamed into the entire organization’s value proposition and strategic risk
management paradigm. While financial aspects of risk are mainstays of corporate risk
management, non-financial risk must now be treated with equal importance on risk agenda
(Ruggie, 2003).
Viewing non-financial risk management in the same way as risk management through the
aid of Figure 1, for example, offers an interesting and unique insight. It is a way to bring the
agenda of “merging environment and economics in decision making” into the boardroom.
In contrast to this, other more intangible and rather unpredictable factors such as
environmental and social concerns receive less attention, as definite scientific or
quantifiable proof might be lacking, or because precise probabilities of occurrence are
difficult to estimate (Busch and Hoffmann, 2007).

Implications of non-financial risk management

Significance of non-financial risk management
Non-financial risk management provides a venue for explicitly incorporating uncertainty in
the analysis and decision-making process for the organizations (Thomas, 2006; Schwartz
and Tilling, 2009). The objective of non-financial risk management could then be seen as

VOL. 14 NO. 4 2014 CORPORATE GOVERNANCE PAGE 577

 a useful mechanism for organizations to achieve corporate sustainability and their business
goals.
Along with helping to reach business’ goals, non-financial risk management system seeks
to minimize such risks and the negative aspects of unsustainable practices by businesses.
The objective of such an approach can first of all reduce overhead and material costs;
second, increase compliance followed by the reduction of fines or penalties; and, finally,
improve competiveness and marketing opportunities (Porter, 1985; 1991; Porter and van
der Linde, 1995; Welford, 2000; Spedding and Rose, 2008).
Morhardt et al. (2002) further highlights the following reasons to explain the significance for
corporations to engage in non-financial risk management as a vehicle to manage their
environmental and social risks:
 compliance with regulatory requirements and proactive cost reduction of future, stricter
regulations;
 compliance with industry environmental codes, especially in the case of sanctions for
non-compliance;
 reduction of operating costs;
 promotion of stakeholder relations;
 the perceived environmental visibility of the firm;
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 the notion that reporting on such issues can yield competitive advantages;
 The sense that with active environmental management lacking, the organizational
legitimacy of the company is questionable; and
 the sense of the social responsibilities of doing business and desire to adhere to
societal norms.
In the past, improving environmental conditions inside the company and improving the
social conditions of workers used to be thought of as a social cost (Frankental, 2001); the
argument can now be made that the firm will build a better reputation, enhance financial
performance and improve competitive advantage by pursuing non-financial risk
management.
Non-financial risk management is a multifaceted approach that is designed to help
business managers make informed, defensible risk management decisions as part of a
sustainable development strategy. Non-financial risk management is also a process or
approach that translates the intangible or non-quantifiable environment and social risks,
such as stakeholder protest or reputation damage and environmental impacts, into a
systematic and identifiable element through the development of risk management
strategies (Bowden et al., 2001; Henriques and Richardson, 2004).
According to Welford (1999), there can never be a single approach to a complicated issue
like sustainable development. There exist different processes or approaches to define such
a concept. Among the six alternatives for defining this concept by Welford (1999), one of
the alternatives is to examine sustainable development in a three-dimensional way, which
is made up of environmental, social and economic elements. The sustainable organization
will have a high level of performance on the economic or financial (F), environmental (E)
and social (S) fronts. Therefore, sustainable development (SD) can be articulated as:
SD ⫽ F ⫹ E ⫹ S
To neglect any of these elements is to neglect a fundamental part of sustainable
development agenda. What people have seen to date of course is a neglect of many of the
environmental and social elements of sustainability. The costs of neglecting the
environmental and social elements will certainly have a negative impact on sustainable
development (Welford, 1999). Similarly, looking at it from the other side, a higher level of
performance in sustainable development could only be achieved by taking out the cost of

PAGE 578 CORPORATE GOVERNANCE VOL. 14 NO. 4 2014

 environmental and social risks from profits or financial performance (Anderson and
Anderson, 2009). As a result, based on the definition by Welford (1999) on sustainable
development and the interpretation by Anderson and Anderson (2009), sustainable
development could well be explained as follows:
SD ⫽ FP ⫺ costs of ER ⫺ costs of SR,
where SD ⫽ sustainable development; FP ⫽ profits or financial performance; ER ⫽
environmental risk; and SR ⫽ social risk. As non-financial risk (NFR) is a combination of
environmental and social risks (NFR ⫽ ER ⫹ SR), sustainable development through
non-financial risk management (NFRM) could also be articulated in the formula below:
SD ⫽ FP ⫺ costs of NFR
Referring to one of the definitions on sustainable development by Welford (1999), an
organization needs to consider all three elements to obtain a higher level of performance
in sustainable development. As illustrated above, one can see the risk management aspect
of sustainable development because the costs of risk are subtracted from profit (economic
or financial performance). Certainly, if an organization reduces the costs of environmental
and social or non-financial risks, everything held constant, a high level of performance in
sustainable development will be achieved. As a result, non-financial risk management
(NFRM) could be seen as another approach to increase the level of performance in
sustainable development, or could be construed as:
SD ⫽ NFRM
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Moreover, if we consider sustainability through the triple bottom line (TBL) developed by
Elkington (1998):
Maximised TBL ⫽ FP ⫹ EP ⫹ SP
where F ⫽ financial performance or profits; E ⫽ environmental performance; and S ⫽ social
performance.
Similar to the above discussion, non-financial risk management can then be thought of in
relation to the TBL, which can be articulated as follows:
Maximised TBL ⫽ FP ⫺ Costs of Environment Risk ⫺ Costs of Social Risk
Referring to Elkington’s (1998) work, a business needs to consider all three areas to get to
maximize the triple bottom line. Resembling the above argument in relation to Welford’s
definitions, the risk management aspect of the triple bottom line can be seen here, as the
costs of environmental and social risks are subtracted from profits. Indeed, if a business
reduces the costs of environmental and social risks, while everything else is being held
constant, the triple bottom line will increase (Anderson and Anderson, 2009). As maximized
TBL can also be interpreted as obtaining sustainable development (Elkington, 1998),
non-financial risk management can be explained in the following:
SD ⫽ Profits ⫺ Costs of non-financial risk (throught the implementation of
non-financial risk management)
Therefore, being aware of environmental and social costs (and benefits) – that is the
company’s exposure to potential non-financial risk – can assist the company’s
management in its forward or strategic planning and, consequently, help to reduce the
company’s exposure to future non-financial risks and liabilities. Without adequate and
appropriate systems to identify and account for such costs, it is unlikely that companies will
be able to meet the future expectations of their stakeholders and the requirements of a
more stringent regulatory environment and environmentally and socially aware population
(Henriques and Richardson, 2004). Businesses that adopt non-financial risk management
will clearly have an advantage.
Apart from increasing a corporation’s performance in sustainable development,
non-financial risk management is also about innovation and the opportunity to
simultaneously achieve excellence in sustainable performance for businesses. Capitalizing
on sustainability, however, requires a shift away from seeing non-financial risk issues only

VOL. 14 NO. 4 2014 CORPORATE GOVERNANCE PAGE 579

 as hazards to be avoided; there can actually be opportunities providing business growth
and providing significant possibilities for fresh competiveness.
Developing the capability to recognize opportunities where people usually see hazards
requires a change in the management mindset. This is a critical journey for financial
professionals interested in helping their organizations better manage and benefit from
environmental and social challenges. Companies can become leaders in corporate
sustainability by developing proactive strategies that create opportunities and increase
profits rather than using only passive strategies that respond to government regulation,
industry standards or consumer pressure.
Many companies are looking for workable models for responding to and capitalizing on
environmental and social issues. And a number of mainstream companies want to be more
responsible, but they do not know how increased social and environmental responsibility
and accountability relate to shareholder value, or in short, translating the key concept of
maximizing sustainable performance. The business case and payoffs must be clear, as
should the systems and metrics, to develop, measure and implement innovations around
these issues. Critical elements for companies seeking market success in this challenging
realm include:
 leadership committed to sustainability as a vehicle to market success;
 sustainability strategies that cascade throughout the organization; and
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 effective management controls, performance measures and organizational capacity to

integrate sustainability into corporate strategy.
Some companies may have superior organizational knowledge and capabilities that permit
them to accept risk and respond to it effectively, while their competitors avoid potential
opportunities because of their organizations’ assessments of these risks. Some may be
able to identify voids in the marketplace that provide opportunities for innovation that others
may not see. Innovation and market success often result from a company’s superior ability
to recognize and manage those opportunities.
A company’s ability to use tools to simultaneously perceive and assess risk and opportunity
can enable it to manage offensively as an opportunity rather than defensively as a hazard.
The challenge for companies, then, is to develop strategies that anticipate the changing
business landscape and use environmental and social pressures as sources for innovation.
Transforming social and environmental risks into opportunities for market success is a
three-step process:

1. identifying opportunities;
2. aligning opportunities with strategy; and
3. evaluating opportunities.
Within the management of environmental and social risks, there are opportunities for both
technological and business model innovation. Technological innovation can include new
products and services, process technologies and enabling technologies. Stakeholder
engagement also plays an important role. According to Bekefi and Epstein (2008),
evaluating impacts and the level of trust from the perspective of external stakeholders
(activists, consumers and suppliers) and internal stakeholders (including employees and
the top management team) is important. Effective stakeholder engagement can improve
trust and reputation, and it presents opportunities for responding to concerns through
innovative products.

Opportunities and benefits of non-financial risk management

Technologies and scientific developments, even when not apparently related to one
particular industry, can also be sources of opportunity. For instance, the cell phone is

PAGE 580 CORPORATE GOVERNANCE VOL. 14 NO. 4 2014

 revolutionizing communication and banking in parts of the developing world where land
lines are either non-existent or take years for private citizens to get. Nokia considers the
developing world a huge, expanding market. It has developed two cell phones aimed at the
vast number of African households that will be cell phone users by 2010. According to Kytle
and Ruggie (2005), in South Africa, the cell phone company MTN Group has teamed up
with Standard Bank to create a “cyber bank” aimed at the vast number of rural poor. It
requires only a phone call and a government-issued identity number to subscribe.
As seen from these sources of opportunities that emerged from the management of
environmental and social issues, it can prove beneficial for the firms that adopt a proactive
approach. While such a risk management system can demonstrate that being
environmentally and socially responsible is good for business (Welford, 1999), it may be
that there are more business opportunities through energy savings, waste mitigation
management, better workplace, higher productivity, new product lines or increasing market
share (Salahuddin, 2005; Frost and Burnett, 2007; Spedding and Rose, 2008). The rewards
and opportunity from management on environmental and social issues seem to be
increasing as rapidly as the risks (Spedding and Rose, 2008).
Non-financial risk management encompasses a wide range of steps that are essential for
the sustainable development of both business and communities at large. Not only can
non-financial risk management be applied to assess impacts during an operation of any
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business, but it can help businesses to capitalize on new opportunities when identifying
potential non-financial risk, thus enhancing sustainability and profitability (Porter, 1985;
Bernstein, 1998; Welford, 1999; Benko and D’Archy, 2004). While these opportunities are
not likely to be at the forefront of non-financial risk management, they may be considered
alongside with managing the risk of a business during any operation.
First of all, intangible value is quite often of higher value than tangible value. Reputation is
seen as a driver to enhancing or destroying this intangible value of organizations; whether
they are listed or not, similar factors apply. Respected reputation is built over a long time,
as it is a combination of reliability, credibility, responsibility and trustworthiness, and these
reputation qualities are hard won. It is not just a company’s overall reputation that is
important, but how its reputation is aligned with and meets the expectation of its
stakeholders. If this is achieved, then value will be created (Welford, 2000).
There is evidence to show that the public reputation of a listed company and its share price
movement in the future have a strong correlation. This research was conducted by Mori, the
polling company, which found that the “favourability” rating of the analysed companies led
to corresponding moves in share performance, with a lag between 3 and 12 months
(Financial Times, 2005).
Apart from improving staff productivity and reputation of a firm (Bixner et al., 1999; Knox
and Maklan, 2004), the benefits of reducing overall operational risks and associated costs
(Gouldson, 1999; Welford, 2003), attracting investors (Loh, 2001; Bowden et al., 2001),
easing public fears connected to globalization and free trade (Holme and Watts, 2000;
Welford et al., 2003) and enhancing market reach through competing with other businesses
and through differentiating brand and products (Porter and van der Linde, 1995) have all
emerged at the forefront of what is sometimes referred to as the business case for
sustainable development (Welford, 1997a; Welford, 2003; Welford et al., 2003).
Furthermore, Walley and Whitehead (1994) imply that there is an overall advantage for
business to engage in the management of environmental and other related social issues,
which can be interpreted as profit maximization through lowering the cost of risk and raising
overall revenues (Knox and Maklan, 2004). Others (Porter, 1985; Shrivastava, 1995a;
Bonifant et al., 1995; Garrod and Chadwick, 1996) argue that, apart from raising the bottom
line, the main benefit of managing environmental and social issues is improving the
company competitiveness. As reflected in the earlier section on the implementation of the

VOL. 14 NO. 4 2014 CORPORATE GOVERNANCE PAGE 581

 non-financial risk management tool, the benefit of such a system is to gain competitive
edge through cost reduction and differentiation strategies (Porter, 1985).
The system is also preferable because of the complex interactions between areas such as
the ecological environment and the social environment that cannot be addressed by the
alternative process (Wood, 1991; Shrivastava, 1995b; Gough, 1997; Mehta, 1997; Welford,
1997b; Etherton, 2007; Spedding and Rose, 2008). Non-financial risk management
provides a consistent framework for the analysis of all potential adverse effects, and this
allows different aspects of activities to be compared on a common basis (UNEP, 2003). The
incorporation of different types of non-financial risks allows various information to be
included, such as social, cultural, economic, ecological and technical, that are essential for
business to be competitive and sustainable, although criticism on the strong linkage
between corporate competitiveness and the management of environmental and social
issues has been drawn by others (Wagner et al., 2002).

Challenges of non-financial risk management

While non-financial risk management can help businesses to safeguard the intangible
value (along with other assets) and enhance corporate sustainability, at the same time, one
of the difficulties in establishing an effective framework for evaluating and managing risks
is the treatment of intangible risks (UNEP, 2003). Intangible value is often regarded as
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difficult to measure and break down into its constituent parts. Furthermore, another
obstacle in preventing the case for materiality of non-financial risk is the difficulty in
quantifying and distinguishing the distinct impacts on the overall tangible performance of
a business (Milne and Adler, 1999; Yang, 2000; Renn, 2004; Resnick, 2004; Solomon and
Darby, 2005).
Apart from the above challenges, making non-financial risk an absolutely strong business
case for corporations is still an inherent problem. It was made clear from mainstream risk
professionals that non-financial risk should only be assessed when the business case is
satisfied and can be quantified as material to companies’ default risk or market
performance (Bowden et al., 2001; Daum, 2002; Chester and Woofter, 2005). Referring to
the UNEP Financial Initiative (2003), risk professionals argue that non-financial risk is a
misnomer; rather that risks of a primarily non-financial nature have, or will have, a material
business impact.
In particular, Spedding and Rose (2008) have suggested the major challenges facing the
systems of managing environmental and social issues as follows:
 their implementation while coping with limited financial and staffing resources;
 the measurement of results;
 difficulties in the implementation of such non-financial risk programmes;
 the difficulties of integrating internal management systems and procedures with
sustainable development;
 lack of staff training and executive awareness of the risks and rewards from
sustainability or non-financial risk issues;
 balancing the risks and rewards; and
 the trade-off between different areas of risk reduction prioritization (e.g., idealistically,
a well-managed firm should manage both issues simultaneously. Nonetheless,
companies will usually struggle between the management of environmental issues and
health and safety issues, while one of them presents more risk reduction gains).
One of the major challenges of non-financial risk management is that businesses need to
have a clear understanding of what non-financial risk is. The other major concern is making
the businesses to take and implement non-financial risk management seriously. Moreover,

PAGE 582 CORPORATE GOVERNANCE VOL. 14 NO. 4 2014

 another issue of non-financial risk management is that businesses will need increased
resources and capacity to manage their environmental and social risks if such a risk
management system is going to be effectively operationalized (Welford, 1999; Hunter,
2007; Herz et al., 2008; Anderson and Anderson, 2009).

Conclusion
There are increasingly varying environmental and social and risks – and degrees of risk –
related to locating in specific countries or regions. Therefore, it is vital that the evaluation
and calculation of environmental and social risks be company and industry specific.
Additionally, non-financial risk management has become an extremely complex
undertaking, which must balance numerous conditions, perspectives and variables across
an organization. The very nature of non-financial risk places management teams in the
challenging position of setting clear direction for a diffused function.
A key assertion of this article is that corporations can no longer rely only on old, established
strategies and existing risk management practices. For the complex and evolving area of
environmental and social risks, non-financial risk management represents an excellent
mechanism for addressing these challenges across the corporation. Examining new areas
of emerging risk and monitoring their impacts through the development of non-financial risk
management system is essential for a sustainable and successful business (Welford and
Gouldson, 1993; Welford, 1999; Spedding and Rose, 2008; Anderson and Anderson, 2009;
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Ulhøi and Madsen, 2009). Resulting from the above argument, integrating environmental
and social risks is critical to the effective management of a company’s real risks, and to
improved resource allocation for enhancing corporate sustainability. This demands the
quantification of environmental and social risks in an atypical manner. To account for these
risks, they must be identified, measured and monetized, just as traditional risks such as
commodity prices and credit risks are identified, measured and eventually monetized.
Environmental and social risks that can devastate a company’s operations can be
adequately accounted for, rather than being relegated to a footnote to financial calculations
in the hope that the risks will not emerge. The management of non-financial risk also
enables decision-makers to devise strategies that can produce significant cost savings
and opportunities. Most importantly, the development of non-financial risk management
provides an interface for complicated environmental and social risks and the executive
boardroom, however.

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Corresponding author
Anson Wong can be contacted at: ansonwong@ckgsb.edu.cn

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