Main Risks Faced by Enel Americas
Considering the current global scenario and its trends, we have identified and examined the most noteworthy current and future ESG megatrends to identify risks, curb their impacts, and completely leverage opportunities locally.
Accordingly, the Company believes it is important to understand the environmental, social and governance (ESG) contexts to identify either internal or external factors that have the potential to become ESG risks in the future, as we consider this inherent to the management of any business, its strategy and its day-to-day operations, and, as such, they must be managed, controlled and mitigated.
Given the impact and opportunities that sustainability or ESG risks may have for the Company, we consider them an integral part of our risk management policy, which is described in detail under Integrated Annual Report Enel Americas 2022.
Company’s main ESG risks
Environmental Risks:
Environmental risks can arise during the Company's operations as a result of how it relates to the environment and ecosystems, and from the exploitation of scarce natural resources (including raw materials and water). In some cases, the joint occurrence of these risks can trigger environmental emergencies in the planet’s most sensitive areas, with the ensuing risk of generating competition among various stakeholders for the different uses of water resources. In order to mitigate these risks, the Company requires that every project contain effective preventive and mitigation measures of environmental impacts and risks, as fundamental and decisive features, throughout the entire life cycle. This involves adopting technological and nature-based solutions to optimize the use of resources, as well as signing collaboration agreements with other users of water resources.
The Company is aware of and committed to mitigating climate change related risks, associated with the impact of extreme events, on the availability of assets and infrastructure due to the occurrence of extreme weather conditions or with gradual—but structural—changes (physical risks), and due to the requirements imposed by the energy transition towards a more sustainable business model (transition risks).
Regarding physical risks, the Company could be exposed to either more or less sustained unavailability of assets and infrastructure, to recovery costs, and even to inconveniences for some of our customers. Regarding transition risks, our Company has opted for a low-carbon economy pathway which may involve regulatory, political, legal, technological, market risks and other changes that could have a short-, medium- or long-term effect.
A detailed explanation of these risks is presented in the Zero Emission Ambition chapter in Enel Americas Sustainability Report 2022.
Social Risks:
Social risks can arise during social conflicts, the intensity of which can jeopardize the Company's operational continuity. We have adopted a strategy based on continuous dialogue at the territorial level to address the potential impact of social risks. The strategy involves working with community relations and stakeholder engagement teams. We also have social investment capital, which facilitates local socioeconomic development, supported by structured grievance and complaint management systems—key tools for monitoring and mitigating operational conflicts. In addition, we have contingency management plans and procedures that prioritize the continuous delivery of generated energy to the system, electricity to our customers, and the safety of people, as we are aware of the strategic role that electricity plays in the region.
Enel is also exposed to the risk that ineffectively engaging key stakeholders poses to its strategic positioning on sustainability and financial objectives, whether the result of not understanding, anticipating or managing their expectations, as this could lead to an incomplete incorporation of these expectations into the business strategy and sustainability planning processes. We use materiality analysis, our dialogue-based engagement strategy, and shared value creation to actively incorporate and manage our stakeholder expectations and relations across the entire value chain, with a specific focus on business development, engineering and construction, procurement, asset management, and maintenance.
Regarding health and safety risks, such as those arising from employee and/or contractor accidents, we are responsible for promoting a culture of prevention and safety, highlighting the definition of policies and the integration of safety in processes and training, among others. Likewise, employees may be exposed to health risks related to emerging infectious diseases during possible epidemics and pandemics. These may affect their health and wellbeing. Accordingly, the Company created a special unit to manage these risks and roll out necessary preventive and protective actions.
Regarding risks related to diversity and inclusion and talent attraction and retention in the context of the energy transition, we have diversity and talent management and promotion policies. We carry out various initiatives designed to foster a better work-life balance and promote educational and growth opportunities through scholarships and courses, with the wellbeing of our employees and their families in mind.
Governance Risks:
Governance risks can arise as part of the overall running of the Company, through illegal acts, including corruption, lobbying, anti-competitive practices, and unfair management, among others, committed by our own personnel or contractors. We have an Internal Control and Risk Management System based on business rules and procedures to mitigate these risks.
In addition, risks concerning human rights violations are addressed through our annual due diligence process that is applied across the board to all functions on the Company’s and subsidiaries’ value chain. Through this process we are able to draw up action plans to address any vulnerabilities or impacts that we detect.
Emerging Risks:
The ongoing digital transformation and our growing reliance on it leads to emerging digitization, business continuity, and cybersecurity risks, in addition to personal data protection and security risks.
Digitalization, information technology (IT) efficiency and service continuity have all been identified as emerging risks as we undertake the digital transformation of our entire value chain management system that entails developing new business models, digitizing our processes, integrating systems and adopting new technologies.
The speed of technological development always leads to new challenges. The frequency and intensity of cyber-attacks continue to rise, as well as the upward trend of them affecting critical infrastructure and strategic industrial sectors, such as ours. This brings to light the potential risk of this impacting normal business operations, as an extreme example.
We serve more than two million customers and directly employ close to 2,160 people, making it necessary for us to have a business model that can manage a significant volume of personal data, and the corresponding exposure to the risks involved in processing personal data, as well as increasingly stringent privacy legislation worldwide. Accordingly, protecting personal data is a key concern and considered an emerging risk for the Company.
For more details on risk impact and management, please refer to the Integrated Annual Report Enel Americas 2022.