The current situation and the ensuing changes expose companies to a number of risks. Abengoa has identified and must strive to mitigate a range of risks, and has also pinpointed a number of opportunities associated with these risks:

• Reputational risks

Related to company image. The company’s image may be affected if stakeholders perceive negative or irresponsible attitudes on the part of the company.

On the other hand, the associated opportunity is that companies embracing a proactive focus on sustainability will gain support from customers, markets and stakeholders who value the efforts of responsible companies.

 

• Regulatory risks

Associated with the need for the company to new regulatory frameworks, entailing costs that could jeopardize the viability of certain operations..

Once again, there is a related opportunity, in that investment in innovation will help the company, among other things, to cut greenhouse gas (GHG) emissions, leaving it better positioned to deal with regulatory change in this regard.

• Legal risks

Related to infringements of prevailing laws and regulations.

As competing companies that do not abide strictly with prevailing legislation see their costs go up as a result of lawsuits or sanctions, those organizations that do fulfill their commitments will obtain clear competitive advantages.

• Physical risks

Deriving from natural catastrophes brought on by phenomena such as climate change. These can seriously damage company installations, as occurred in the case of the tsunami and earthquake that devastated Japan in March of 2011 and that caused, among other things, what is considered to date to be the second worst nuclear catastrophe in history. Another prime example would be Hurricane Irene, which wreaked havoc upon the Caribbean and the east coast of the USA, causing serious damage to industries in the affected regions; or the earthquake that ravaged Haiti in 2010 and which led to massive humanitarian disaster and even impacted the global economy.

The tsunami in Japan unleashed a worldwide energy crisis that led to the closing of numerous nuclear plants. For this reason, one of the most obvious opportunities arises out of the need to meet the gap in energy generating capacity through plants that produce electricity from other sources, such as renewables.

• Risks related to company value

Poor management of a company can have a negative effect on the company’s market value. Furthermore, sustainability indices evaluate companies according to their sustainability policies, thus guiding investors.

Having reliable systems in place that enable the company to make decisions based on real information and having a thoroughly developed sustainability policy that is recognized in the markets will mitigate these types of risks and create a competitive edge for the organization.

• Risks that are difficult to measure

These include market changes, exemplified by growing pressure to reduce emissions, which may give certain regions a competitive edge over others due to the natural resources available to them (access to solar radiation, for example).

Anticipating trends is a good way to capitalize on the opportunities related to risks which, due to their particular characteristics, are difficult to classify and are, a priori, unpredictable.

Apart from managing risk, Abengoa’s sustainability policy must create opportunities from these risks through suitable monitoring, measurement, and rectification tools.