Country Risk Assessment

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Country Risk Assessment

According to the supply chain due diligence acts, companies shall establish an appropriate and effective risk management system to identify, prevent, mitigate and eliminate human rights or environment-related risks and violations. It is specified that companies should follow a risk-based approach; for example, by allocating resources in a targeted way and addressing the most important and urgent issues first.

The risk analysis must be conducted on a yearly basis and on an ad hoc basis. The risk assessment also plays a central role in the overarching strategic and operational orientation as well as the practical implementation of both the risk management system and individual due diligence processes.

We at Leadership & Sustainability support our clients in preparing risk analyses and helping companies derive appropriate corrective actions. The process of a materiality assessment can give insights into understanding current risks and opportunities, and can therefore be seen as the starting point for any sustainability business strategy and deeper analyses, such as country risk assessments.

Purpose of a Country Risk Assessment

At Leadership & Sustainability, we conduct Country Risk Assessments in order to identify and evaluate whether and to what degree there is a risk of adverse human rights and environment-related violations in our client’s own business areas and in their supply chains.

When first assessing country-specific risks it makes sense to focus on own production sites and direct suppliers where brands have the most operational control and can therefore exert the greatest influence on changes.

During the assessment, the significance of risks and impacts on our client’s businesses and operations are determined. Additionally, the country risk assessment enhances transparency and consolidates a large amount of information on different sourcing countries into a concise and clear assessment overview.

Methodology and Resources

In general, country-specific risks cover a wide spectrum. Together with our clients, we decide on the most significant social and environmental risks, which are assessed in an individual evaluation combining qualitative and quantitative analysis.

In assessing social risks, we focus on the most significant risks of labor and human rights, like freedom of association, child labor and forced labor. In addition, the most significant environmental risks, such as GHG emissions and the use of chemicals, are assessed.

Gross Risk Analysis: The assessment may cover a number of countries. We can either assess all suppliers and production countries of a client, or we decide, of course, in cooperation with our clients, on individual countries where a significant portion of sourcing and production is taking place.By relying on trustworthy information from the international public as well as governmental sources, we can give our clients a holistic overview of the potential country-specific risk areas. Sources used are, for example, the Textile Risk Expert System (T-REXS)provided by the German Partnership for Sustainable Textiles or the CSR Risk Check, which is an online tool provided by MVO Nederland.
Net Risk Analysis: By taking into account the preventive measures already implemented by our clients, the resulting net risks (remaining risks) are identified. With the help of audits such as ISO 14001 or SMETA-Sedex, certifications such as GOTS, STeP, GRS or Higg FEM Verification, the implementation of a supplier’s Code of Conduct or other on-site visits, our clients sometimes already ensure that social and environmental standards are upheld in some of their sourcing and production sites. Therefore, they are able to reduce the current gross risk in some of the assessed social and environmental categories in the corresponding countries.Nevertheless, there is usually room for improvement, preventive actions must be implemented and further internal as well as external audits and regular risk assessments and action plan must be implemented.
Mitigation and Risk Reduction: Brands and retailers aim to implement measures to minimize risks to people and the environment in a holistic way with a risk-informed sustainability action plan which eventually can also provide a source of competitive advantage. Therefore, our clients can utilize the country risk assessment results to take preventive and corrective actions and implement mitigation measures in order to enhance the social and environmental performance of their business operations.

Why Choose Leadership & Sustainability

Leadership & Sustainability is a professional partner with expertise in the textile industry and is able to analyze risks specifically from a textile perspective. We have social and environmental experts in different countries around the world with first-hand experience from manufacturing sites and can guarantee an efficient working method due to competent experience. We offer a high-quality method, which we are happy to tailor together with our customers to their individual needs. Leadership & Sustainability is a partner that works at eye level and can additionally offer to develop concrete measures to reduce your company’s risks!

Country Risk Assessment