In today’s complex regulatory landscape, EHS leaders face the dual challenge of managing both compliance risk and operational risk. While these risks are closely linked, understanding their distinctions—and how to manage them together—is essential for building a resilient, audit-ready EHS program.
Understanding the Risks
Compliance risk is the potential for penalties, legal action, or reputational harm resulting from failure to meet external EHS requirements. These requirements include environmental permits, occupational health and safety laws, and industry standards.
Operational risk, on the other hand, refers to the risk of loss or harm due to failures in internal EHS processes, people, or systems. This can include equipment breakdowns, unsafe work practices, or environmental incidents.
While compliance risk is driven by external legal obligations, operational risk is internal performance and resilience. Leading EHS programs manage both distinctly but also connect legal obligations directly to operational controls and procedures.
EHS Risks in Practice
Compliance risk:
Exposure to fines, sanctions, or harm from not meeting EHS laws, permits, or standards.
Examples: Exceeding air emission limits, failing to report a workplace injury, missing hazardous waste training.
Typical owners: EHS, Legal, Compliance teams.
Operational risk:
Examples: Chemical spill due to poor maintenance, injury from unsafe work practices, environmental release from equipment failure.
Typical owners: EHS, Operations, Maintenance, HR.
Compliance vs Operational Risk Side-by-Side: EHS Perspective
|
Dimension |
Compliance Risk (EHS) |
Operational Risk (EHS) |
|
Primary driver |
External EHS laws, permits, standards |
Internal EHS processes, systems, people |
|
Failure mode |
Breach of EHS legal/permit obligation |
Process breakdown, unsafe act, equipment failure |
|
Impact focus |
Fines, sanctions, loss of license, reputational harm |
Injuries, environmental damage, downtime |
|
Control types |
EHS policies, mandatory procedures, legal registers |
Standard Operation Procedures (SOPs), preventive maintenance, safety training |
|
Evidence |
Permits, inspection reports, regulator correspondence, maintenance records, training logs |
Incident logs, maintenance records, training logs |
|
Change triggers |
New/updated EHS law, permit, regulator guidance |
Process redesign, incident trend, tech change |
|
Audit lens |
“Are you meeting EHS obligations?” |
“Are your EHS processes robust and improving?” |
Where Compliance and Operational Risk Intersect
A weak EHS process—such as poor hazardous waste handling—can cause a compliance breach, like illegal disposal. The solution is to map each legal EHS obligation to the specific operational controls (SOPs, training, monitoring) that fulfil it.
Real-World EHS Examples
Compliance risk: Exceeding a wastewater discharge limit and missing the mandatory regulator notification window.
Operational risk: Unplanned shutdown from a failed safety valve due to missed preventive maintenance.
Overlap: A chemical spill (operational failure) that becomes a reportable non-compliance (compliance risk) with potential fines.
Linking EHS Legal Obligations to Controls: A Step-by-Step Guide
- List EHS obligations: Export or view from your legal register, ideally site-specific.
- Assign owners: Each obligation should have a named EHS owner, review cadence, and SLA for changes.
- Map to controls/SOPs: Link each obligation to a named SOP/control, responsible role, and required evidence.
- Set alerts & workflows: Trigger updates when EHS regulations change or when controls fail tests.
- Track KPIs & KRIs:
- Compliance: % EHS obligations in control, audit findings closed.
- Operational: incident frequency, lost time injury rate, environmental release rate.
- Prove it: Maintain version history, approval records, and evidence for audits.
Common Pitfalls in EHS Risk Management
Relying on static spreadsheets—move to auto-updated digital EHS registers.Using generic obligations—apply site-specific EHS applicability.
Not linking legal registers to SOPs—bind them with obligation-to-control links.
No workflow for regulatory updates—ensure EHS controls and training are updated.
“Audit theatre”—policies exist but aren’t practiced; monitor leading indicators.
EHS Example: Obligation → Control Mapping
- Obligation: “Operate within permitted NOx emission limits and submit quarterly reports.”
- Controls: CEMS calibration plan, stack test SOP, reporting workflow, alarm on approach to limit.
- Evidence: Calibration certificates, stack test reports, submitted returns, alarm logs.
- Risks reduced: Compliance risk (exceedance, non-reporting) and operational risk (unplanned outage due to poor control).
Why ERM Libryo and Assess Are an Unrivalled EHS Solution
ERM Libryo transforms complex, ever-changing EHS legislation into clear, actionable, and continually updated requirements. Its Applicability module ensures teams see only what matters for their specific site, supported by digital registers, automatic updates, and strong linkage to EHS operations and evidence—making compliance and operational risk management far more efficient.
ERM Assess complements ERM Libryo by providing a powerful auditing and assessment capability. With the Assess add-on, organizations can build and execute compliance protocols, link assessments to relevant legislation, and systematically evaluate EHS performance. Both Libryo and Assess enable organizations to turn regulatory requirements into actionable controls, assign and track compliance tasks, and maintain audit-ready evidence—all within a unified ecosystem.
Together, ERM Libryo and Assess give EHS leaders a comprehensive digital toolkit for managing obligations, controls, and assessments—driving continuous improvement and reducing both compliance and operational risks.
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