Risk managers can drive sustainability, as firms eye net zero

Sustainability is a strategic and enterprise-wide undertaking that starts with a clear understanding of the related risks and opportunities for organisations and their business activities—and the role of the risk manager in evaluating this dynamic is key.

That is the view of Valentina Paduano, vice-president and chair of the Sustainability Committee, FERMA, and chief risk & compliance officer, Dedalus Group, a healthcare software company. 

Speaking to FERMA Forum Today, she said that the experience that risk managers offer, gained from maintaining an enterprise risk management (ERM) model, and the necessary skills and understanding of the governance structures they have, mean they are ideally placed to elevate this critical area to the senior level. 

“For risk managers, of course, this is both a challenge and an opportunity,” she said. “To fulfil this role, they need to acquire new technical competences in ESG scenario analysis and expand the scope of their responsibilities if they are to establish their position within the sustainability framework moving forward.”

FERMA research of its members has shown that most risk managers are currently contributing to the analysis and management of ESG-related risks. Further, it has revealed that integrating risk management and ESG/sustainability is the primary area of investment over the next few years for organisations from a risk management perspective as they look to drive up maturity in this area.

Sustainability is a core topic for FERMA generally. FERMA’s Sustainability Committee, which draws on the expertise of risk managers from nearly all of FERMA’s member associations, is focused on topics ranging from the risk management implications of sustainability-related EU policy to insuring the transition. 

This work explains why sustainability is a major thematic part of FERMA Forum and it will be a central area of focus of the FERMA Seminar 2025—“Going Beyond the Value Chain”.

Regulatory burden

Paduano acknowledged that one of the challenges can be the regulatory burden created by the related reporting requirements. “However, we need to recognise that this is an important aspect of how the EU will achieve its transition goals,” she said.

“Reporting requirements, which now also apply to SMEs as well as larger organisations, are an important step in driving the changes that are required in business models—not just in Europe but around the world. The hope is that they will create a domino effect which will result in a much greater adherence to ESG and sustainability targets.”

She claims that by introducing reporting requirements, indirectly, regulators are imposing a necessary re-engineering or re-thinking of business processes.

Paduano noted that FERMA was a co-rapporteur of the recent EU Climate Resilience Dialogue and that risk managers play a key role in the climate resilience process. The scenario-based analysis applicable to physical climate change-related risks enables strategic decisions to be made both in relation to levels of resilience as well as the ongoing competitiveness of the organisation.

“Indeed, analysis of the climate protection gap conducted by the EU Climate Resilience Dialogue group shows that one of the contributing factors is a low level of risk awareness among citizens, companies, public bodies etc. To support increased risk awareness, we must therefore work on improving access to robust and clear data to enhance the ability to evaluate the impact of climate-related risks and develop possible solutions to mitigate them,” she said.

“While it may not be possible to achieve full insurance coverage for all the associated risks, a pre-condition of insurability should be to invest in climate resilience and risk mitigation measures. The Dialogue report findings call for all critical stakeholders in this process—public authorities, businesses, insurers etc—to maintain high levels of engagement and collaboration to address the multiple challenges we face.”

A transition phase

In terms of next steps, she noted that the next target for businesses is to become carbon neutral. There is still uncertainty regarding which is the right path to take to achieve that, but she stresses the important role of the insurance industry in supporting companies investing in new technologies and business areas that will facilitate the transition.

“According to FERMA research, approximately half of risk managers believe that some key business risks will become uninsurable in the near future.”

“Risk managers are playing a central role in helping organisations to evaluate the potential risks stemming from the transition phase. However, the level of uncertainty is high and combined with the huge financial investments needed, the support of the insurance industry in this process will be vital.

“At present, that level of market support is not sufficient. According to FERMA research, approximately half of risk managers believe that some key business risks will become uninsurable in the near future. It is therefore imperative that we address this coverage shortfall.

“To achieve this, companies need to recognise the challenges faced by the insurance industry in providing solutions for this phase of the transition. They must look to collaborate more with the industry by sharing their risk scenario analysis in order to evaluate the most effective mitigation and management strategies.”

FERMA Forum Today is in partnership with Captive Review, part of Newton Media.

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