ESG LECTURE-2 | CS PROFESSIONAL NEW SYLLABUS | ENVIORMENT, SOCIAL & GOVERNANCE

CS ANOOP JAIN・2 minutes read

The ESG paper covers environment, social, and governance topics, with each part worth different marks, focusing on risk management and sustainability, and emphasizing the importance of understanding and managing risks in business. Identifying and managing systematic and unsystematic risks, including financial and non-financial risks, is crucial for business success and involves proactive strategies like diversification and effective crisis management.

Insights

  • The ESG paper is structured into three main sections: environment, social, and governance, with varying weightage for each part. Part A, which is content-heavy, holds the highest marks at 65, while Part B, focusing on risk management, starts from page 656 and is crucial for scoring well. Part C, covering sustainability, is around 120 pages long and is worth 15 marks.
  • Effective risk management is vital for every business to avoid potential harm and ensure success. Risks, ranging from financial uncertainties to health issues, must be understood and identified to be managed properly. While it's impossible to eliminate risks entirely, managing them proactively through a comprehensive approach involving various aspects of the business, such as HR policies and staff motivation, is more beneficial than dealing with crises after they occur. Examples of systematic risks, like external factors affecting multiple organizations, and unsystematic risks, specific to individual organizations, provide insights into categorizing and managing different types of risks for business stability and success.

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Recent questions

  • What are the three parts of the ESG paper?

    Environment, social, governance

  • How is risk management emphasized in the ESG module?

    Part B focuses on risk management

  • Why is understanding risk crucial for business success?

    Managing risks is crucial for every business

  • What are examples of systematic and unsystematic risks?

    Systematic risks are controllable, unsystematic risks are specific

  • How can businesses manage equity risk effectively?

    Diversifying investments and hedging

Related videos

Summary

00:00

"ESG Paper: Content, Risk, Sustainability, Success"

  • ESG paper is divided into three parts: environment, social, and governance.
  • Part A is worth 65 marks, Part B is worth 20 marks, and Part C is worth 15 marks.
  • The ESG module is around 850 pages long, with Part A being content-heavy.
  • Part B focuses on risk management, starting from page 656 in the module.
  • Part C covers sustainability and is approximately 120 pages long.
  • Understanding the concept of risk and risk management practically is crucial for scoring well.
  • General content is more challenging to write in one's own words compared to legal provisions.
  • The method of reading and analyzing content must be different for general and legal material.
  • Properly framing answers in question-answer form is essential for success in the ESG paper.
  • The ESG paper requires a significant amount of time and effort due to its content and reading method.

19:38

"Effective Risk Management for Business Success"

  • Managing risks is crucial for every business to avoid potential harm and ensure success.
  • It is impossible to eliminate risks entirely, but they can be managed effectively.
  • Understanding and identifying risks is the first step towards risk management.
  • Risks can range from financial uncertainties to health issues, requiring proper management.
  • Health insurance is a form of risk management to mitigate potential health-related risks.
  • Crisis management becomes necessary when risks are not managed effectively, leading to potential crises.
  • Managing risks proactively is more beneficial than dealing with crises after they occur.
  • Quality of products, raw materials, customer service, government regulations, pricing, and staff policies are key areas to focus on for risk management.
  • Anticipating and adapting to potential changes in government regulations is essential for business stability.
  • Effective risk management requires a comprehensive approach involving various aspects of the business, including HR policies and staff motivation.

36:33

Managing Risks in Business: Systematic vs Unsystematic

  • Management is the focus of this chapter, emphasizing the importance of understanding and managing risks in business.
  • The text discusses the classification of risks, distinguishing between systematic and unsystematic risks.
  • Systematic risks are controllable and affect multiple organizations, while unsystematic risks are specific to individual organizations.
  • Examples of systematic risks include external factors like Covid-19, which impact multiple organizations.
  • Unsystematic risks, such as fraud within an organization, can be controlled through measures like implementing a whistleblower policy.
  • Financial risks directly impact a company's financial position, while non-financial risks indirectly affect finances.
  • Examples of financial risks include political risk, liquidity risk, currency risk, credit risk, equity risk, interest rate risk, compliance risk, strategic risk, fraud risk, reputation risk, and disaster risk.
  • Financial risks cause immediate financial harm, while non-financial risks may lead to financial losses over time if not managed.
  • An example of a financial risk is a change in government policy affecting a company's business, like the ban on poly boxes.
  • Understanding and categorizing risks into systematic or unsystematic helps in effectively managing resources and mitigating potential harm to the organization.

57:35

"Government Policy on Poly Bags and Risks"

  • Government policy on poly bags remains unchanged
  • Secretary advises director on potential risk of poly bag ban
  • Suggests diversifying into bags made from cloth or jute
  • Emphasizes the need for alternative materials to avoid business disruption
  • Discusses the rise of cloth bags as a potential alternative
  • Strategic risk example involving eBay's sale of Skype shares
  • eBay's loss due to strategic risk in selling shares to Microsoft
  • Explanation of strategic risk in business decision-making
  • Practical example of strategic risk in real estate investment
  • Definition and explanation of equity risk in investment
  • Importance of managing equity risk in financial investments
  • Discussion on the uncontrollable nature of equity risk in market fluctuations
  • Practical example of equity risk in Satyam investment with Ramalinga Raju
  • Explanation of window dressing in financial statements and its risks.

01:14:41

"Reputation and Equity Risks in Business"

  • Exaggerating assets affects company perception, impacting share value.
  • Share value increase leads to more purchases, while decrease signals issues.
  • Ramalinga Raju's fraud at Satyam led to share price plummeting.
  • Market losses due to fraud led to suicides and significant financial impact.
  • Managing equity risk involves diversifying investments and hedging.
  • Reputation risk can harm businesses, as seen with Maggi and Tata Nano.
  • Reputation risk management involves providing quality products and services to customers.
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