The Application of Environmental, Social and Governance Standards in Operational Risk Management in SSC in Poland

Abstract

Organizations are facing increasing pressure to be transparent about their performance and to accept responsibility for their impacts on both society and the environment. The role of ESG is essential from a reporting standpoint. New regulations are forcing organizations to focus more on cascading ESG risk management in order to ensure that the various ESG objectives are analyzed and monitored at the group and subsidiary levels. This article employed the results of an empirical study conducted on risk management concerning shared service centers in Poland. In addition, a case study was conducted based on their internal reports and financial statements. At this stage, SSCs are focusing solely on financial risks and are ignoring the broader perspective. Thus, the promotion of ESG practices in organizations currently represents the most critical factor. ESG-related activities should be cascaded to company subsidiaries, especially those that employ internally separated processes, operate globally and are responsible for end-to-end processes. Based on an analysis of financial statements, few entities currently even consider operational risks, including ESG-related risks. Companies should re-examine their internal governance approach so as to ensure the effective cascading of ESG objectives to the lower levels of the organizational structure.