Environmental Risk Management

Risk Management: Helps you understand what to do about the environmental hazard. You have some control options these are some of the different ways you have for reducing risks.

Control Options: Ex. Let say you have some sort of a fluid toxic liquid, what can you do about it? You can put it in a jar that doesn’t leak or tell people to put on gloves when handling the containers of it. Let say there is an air toxic, have people put on a face mask. If it is solid waste, have it put in a segregated area and dispose it properly.

Legal Considerations: There is a lot of laws that are very specific about risk reduction and the methods of achieving it. You as a firm can decide how you think its best to alleviate that risk but certain laws will say no when you have this liquid that is toxic you must have XY and Z control in place because that is the way the law is written.

Economic & Social Factors: The problem is a lot of decisions cannot be based exclusively on scientific finance.

Cost-Benefit Analysis: This systemic calculation in comparison of a different cost and benefits of a proposition. It helps you weigh which control option is the best one for us as a firm. What is the best way for us to comply with that regulation as a firm and what would our stakeholders think about our given actions and will that option influence us in one way or another. A lot of costs calculations can include enforcement costs, well it’s dangerous to our workers in the environment but how much will it cost us to avoid these risks. Is it worth the money. Capital & compliance costs to the industry. So would we have to significantly rebuild our factory in order to meet new standard if so maybe we don’t do it. Certain jobs might be lost because a plant can no longer be open because it was dump in water in a stream. Unemployment has risen because plant polluted air. Higher consumer prices, a lot of environmental regulations costly and manufactures will pass that cost on to consumers, so cheap manufactured products may go up in price for the average and lower class consumer just because the business had to comply with environmental regulations. They could reduce productivity, environmental regulations means you have to take extra steps to do the right thing, more hours of the day can be spend with trying to comply with environment. A lot of benefits are good to the environment, health benefits for workers and numbers of society.
The good thing about cost-benefit analysis, is it forces you to think quantitatively on issues that are inherently qualitative. Instead of trying to appeal to your boss, “Wow we’re destroying the environment, you’re giving people cancer.” –emotional argument. It forces you to communicate with your boss in a way they can understand, “Well if we continue in this path we may have these lawsuits, compliance costs, problems with consumers and that may cause the firm money. You are using a rational argument to something that is qualitative or very emotional.
Another big problem with any firm is opportunity cost & the cost-benefit analysis allows you to focus on those programs that cost the least to implement bust have the greatest impact. Cost-benefit analysis is not perfect the biggest thing is, “how do you assign a value to eco system goods?” How do you put a price on benefits to the environment? –subjective process. Matric- The value of a statistical life: how much are you willing to pay for reducing the risk of a pre-mature death in a population exposed to a pollution hazard. You are not only calculating the cost of a human life but you are calculating the cost of the length of a human life and the quality of that human life. Cost-benefit approaches, basically deny the idea of conditional protection instead of saying we should do everything for the environment to protect the environment no matter what, it only says we should protect the environment if protecting it is more financially beneficial then not protecting it.
The benefit in cost of that programs falls in separate parties what that means, you can have an environment at protection program that the firm has to pay for but it’s the members of society that benefit so it some way makes a firm be respectful of the environment.

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