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IBM OpenPages Risk Management for ESG Helps Corporate Leaders Understand their Firm’s ESG Risks

Acing ESG Risk Awareness with IBM OpenPages Risk Management for ESG

IBM OpenPages with Watson is an integrated risk management platform built to help organizations stay on top of their ESG goals. Organizations whose board members and executive leadership are far behind in their grasp of ESG risks can leverage the tool to quickly adapt to the latest ESG reporting framework!

The term environmental, social, and governance (ESG) has a become a global buzzword. As per Google Trends, the internet searches for ESG increased 5X times since 2019. Alongside the growing ESG prominence, a recent PwC survey finds that almost two-thirds of the corporate leaders lack a strong understanding of ESG risks impacting their business!

The Annual Corporate Directors survey involved 600+ directors of public companies in the U.S. with revenue over $1 billion across 12 industries. The results revealed that only a quarter of these firms understand carbon emissions and even fewer are aware of the climate risks or strategy. The Deloitte’s 2022 Global Third-party Risk Management survey also reported that even though organizations across the globe increased their awareness on ESG issues, most of them lack formal procedures to assess and prioritize ESG risks in their extended enterprise.

If your business is looking to be more attuned to the current ESG trends, this blog will help familiarize you with the common ESG risks and the role of IBM OpenPages Risk Management for ESG in improving ESG risk awareness.

Understanding of ESG Risks and Their Relevance

The terminology, ESG risks is popular in the investor (institutional and non-institutional) community to evaluate the sustainability and the risk profile of portfolio business. Awareness of the risks by businesses is important to building a well-defined approach to managing ESG issues and make sure it is integrated into their business philosophies, processes, products, and services. Understanding ESG risks is imperative to avoiding legal fines, enhancing brand reputation, shareholder engagement, and customer loyalty, and increasing access to investor capital.  Irrespective of the size or industry an organization or a business operates, below are the list of standard ESG risks with examples:

  • Environmental Risks: At a high level, environmental ESG risks refer to the immediate, tangible impact a business has on the environment, and it interacts with biodiversity and natural resources. It includes physical risks and transition risks.
  • Physical Risks: Physical risks are rising carbon emission levels, deforestation, rising sea levels, water security, waste generation, draughts, and natural calamities. The physical risks can also include supply chain disruptions impacted by climate change.
  • Transition Risks: These are risks induced from the sudden shift to low-carbon and eco-friendly alternative technology breakthroughs. It also includes introduction of carbon tax, emission reporting requirements, possibilities of lawsuits and restrictions that can negatively influence stakeholders, consumer perception, and industry reputation. The rapid shift impacts the demand-supply and pricing dynamics of fossil fuels and renewable energy markets, causing immense pressures to the businesses and economies to adapt to climate-resilient strategies.

Relevance of E-risks

The environmental risks have an immediate, tangible impact on the physical structures and risks of damage to production facilities, housing and commercial properties, real estate and agriculture. The economic losses from frequent climate shifts and calamity-induced damage to life and property impact the global financial systems and public and private insurance companies. As per the AON’s 2020 Weather, Climate and Catastrophe Insight reports, economic losses in the U.S. from natural disasters totaled up to $2.98 trillion in the last decade.

Awareness of the ‘e’ risks helps insurance companies and businesses keep track of the risk indicators and risk appetite to devise insurance policies, premiums, and other relevant strategies.

  • Social Risks: Social risks take into consideration all the elements involving an establishment’s treatment of its human resources. It also includes the social impact on customers, stakeholders, and the community at large. Social risks are measured based on a business’ current labor practices, payment structures, health and safety measures, inclusion and diversity policies, product, and services safety, and contribution to the local economy and community.

Relevance of ‘S’ Risks: Regulators, employees, and consumers take notice of how often companies are committed to their social factors with ethical policies, practices, and culture that do not endanger the well-being of the community. Stakeholders including suppliers stay up to date with the ESG standards to promote safe workplaces and ethical sourcing of talent. Additionally, recent industry research suggests that the public is the strongest advocate of ethical practices and treatment of workers and employees by businesses.  In fact, PwC research found that 76% of consumers reportedly expressed that they would discontinue their ties with companies and brands that treat employees, communities, and the environment poorly.

  • Governance Risks: Governance risks indicate how a business governs its operations, executive board, and various policies that oversee its tax compliance, executive compensation, data management, prevention of corrupt practices, and general communication strategies for enhanced transparency.

Relevance of the ‘G’ Risks: Corporations that ignore governance factors in ESG risk prevention can suffer fines that can stress them financially. Governance risk awareness largely emphasizes the need for transparency on the business’ overall stance on regulatory compliance and policies based on their board practices.

Grow Your Understanding of ESG Risks with IBM OpenPages Risk Management for ESG

Technology platforms like IBM OpenPages Risk Management for ESG from the IBM Sustainability Portfolio are built to help businesses and enterprises across industries to get ahead by fostering a culture of compliance with regulatory changes. It helps empower first-line to make ESG risk-aware decisions.

To emphasize the context of governance, risk, and compliance (GRC) challenges, IBM partnered with in 2019 and published a whitepaper on the Evolution of GRC: New Tools for First Line of Defense for the financial markets. The paper explored the role of GRC solutions in increasing GRC risk awareness and found that an increase in investments to update GRC systems didn’t render the desire results. Therefore, a user focused, end-to-end GRC solution infused with AI capabilities and tools like the IBM OpenPages with Watson are the game changers for managing ESG projects. Unlike the legacy approach of implementing standalone GRC solutions that are capable addressing only specific risk processes or regulations, IBM OpenPages with Watson’s AI-driven, integrated GRC portfolio is built to break silos. It ensures that risk and compliance professionals do not work in watertight compartments and have an enterprise-wide view of the risk including all business units, partners and suppliers in a single-management system.

The overriding theme of IBM OpenPages with Watson is a collaborative approach where compliance is an org-wide responsibility, and all departments collectively embrace requisite standards.

Industry Leadership of IBM OpenPages with Watson

In 2020, IBM OpenPages was named leader in Gartner’s Magic Quadrant for IT risk management for its robust risk assessment matric and ability to unify enterprise-wide risk and compliance initiatives into a single platform. Additionally, the IBM OpenPages platform for risk management for ESG solution continues to transform the landscape with its AI and analytics, UX design, regulatory content and GRC expertise and advisory services.  The Forrester Consulting’s Total Economic Impact (TEI) study on IBM OpenPages with Watson also revealed cost savings and business benefits for organizations over three years included 21.8% increase in ROI, $5.1 million in benefits, and $3.5 million NPV.

The IBM OpenPages Risk Management for ESG is leveraged across the globe by many renowned customers using On-prem and cloud deployment models. The IBM OpenPages as a part of IBM Cloud Pak for Data, it can be implemented in hybrid mode. Now let us deep-dive to understand the core capabilities and features of IBM OpenPages with Watson for ESG risk assessment.

Core Capabilities of IBM OpenPages with Watson

According to the findings by the IBM Institute for Business Value, over 80% of CEOs are of the opinion that sustainability will drive better business results over the next five years. With sustainability challenges and environmental factors escalating as primary business concerns, IBM OpenPages integrated risk management platform is a combination of 10 solutions and includes non-financial use cases like ESG.

The IBM OpenPages with Watson’s in-built capabilities for ESG risk awareness include:

  1. ESG Questionnaire: Users can understand their organizations’ ESG priorities with the help of the questionnaire in the platform.
  2. Strategic Objectives: Move over guess games with the capture and govern “Strategic objectives” ability in the platform. Additionally, the KPIs also help measure the overall progress and performance.

How Much Do Corporate Leaders Know About ESG Risks

(Source: IBM Data and AI / © 2023 IBM Corporation )

  1. Integrated ESG Objectives: Users can leverage the ‘Link Objectives’ features to integrate it to their existing Processes, Risks, Controls, and Vendors.
  2. Track and Record ESG Indicators: Organizations can readily access information that record a set of indicators for ESG.
  3. ESG Repository: Users can store a library of ESG regulatory requirements and disclosures that can be accessed on-demand.
  4. Evidence Compliance: In addition to understanding the ESG risks, organizations can evaluate whether their ESG goals and practices are compliant with external reporting requirements.
  5. ESG Horizon Scanning: To know whether your organization is sufficiently prepared for potential threats and risks, ESG Horizon Scanning feature is important to assess if further polices or strategies are needed for building resilience.
  6. Supply Wisdom: The platform has third-party risk management tool, Supply Wisdom that covers seven risk domains in real-time for organizations to know their level of risk exposure.

ESG Monitoring by Supply Wisdom

(Source: BM Data and AI / © 2023 IBM Corporation)

Besides these functionalities, the IBM OpenPages with Watson boasts of robust enhancements to the homepage and navigation with personalized dashboard enhancements that include the following features:

  1. A task-focused UI: Task-focused UI with enhancements for task assignments, ability to drill through the features, addition of content directly from the home page, and easy access to reports and dashboards.

A task-focused UI

(Source: IBM Data and AI / © 2023 IBM Corporation )

  1. Out-of-the-box Functionalities: The salient aspect of the IBM OpenPages the platform is the 11 pre-defined solutions and industry-best practices and customer feedback.
  2. Predictive Insights: By leveraging IBM Cognos Analytics’ self-service data exploration and insights features, organizations can unlick useful insights into the risk factors and levels across the business.
  3. Third-party Integrations: Users can achieve seamless data integration with IBM App Connect and REST APIs to integrate GRC processes and workflows with third-party connectors.
  4. High Configuration Features: Apart from the task focused UI, the platform has a drag and configure options and embedded GRC workflows.
  5. Enterprise BI and Reporting: The platform has out-of-the-box reports that outline objectives, framework, third-party risk, and issues. Users can easily author additional reports to support customer-specific requirements.

Enterprise BI and Reporting

(Source: IBM Data and AI / © 2023 IBM Corporation )

  1. Infused AI and ML Capabilities: The 24/7 Watson Assistant integration, Watson Language Translator integration with 52 languages translation capability, NLU and BYO model helps users leverage advanced AI and ML functionality.

Role of IBM OpenPages and iTech GRC Partnership

IBM OpenPages’ AI-driven and highly scalable GRC platform built to run on any cloud helps companies with tens of thousands of users prep for the unknown. There have been over thousands of use cases and customer success stories highlighting the transformative impact of IBM and its superior AI technology.

Getting a hold of a business’ ESG risks with the right data and right people can be a monumental task. Businesses and their leadership can address three key challenges that are an intrinsic part of the global regulatory environment—low visibility, fragmented GRC systems and structure, and limited reach using the IBM OpenPages with Watson.  iTech GRC and IBM’s synergistic partnership enhances organizations’ capability to unlock AI-features to breakdown ESG risks and formulate effective strategies.

ITech’s strong suite of diverse and certified risk management experts and consultants ease your journey towards ESG risk management and compliance with the right know-how and consistent support. To understand how our team can collaborate with your business to implement the latest IBM OpenPages with Watson for your risk management for ESG solution, connect with our experts today.