Managing the Internal Context of a Corporation
An organization’s internal context is the operational environment which it seeks to achieve its objective(s). The internal context includes anything that the organization has control over or where it has a sphere of influence. The sphere of influence is an important concept. It represents the range and extent of political, contractual, economic, or other relationships through which an organization can affect the decisions or activities of organizations.
The internal context can include the following:
Governance, organizational structure, roles, and accountabilities
Policies, objectives, and strategy
Operational capabilities understood in terms of processes, operations, and resources
Decision making, knowledge, and sense making
Engagement with the internal stakeholders
Relationships with other organizations within its value chain
Standards, guidelines, and operating models adopted by the organization
Honoring contractual relationships
An organization must consider everything that is internal and relevant to its mission, strategic direction, processes, and operations. It needs to understand the influence these considerations could have on its sustainability/ESG program and on the results that it intends to achieve.
Understanding the internal context prepares the organization for managing the opportunities and threats originating within its processes and operations. The internal context is also important to the implementation of any risk management activity by the organization. Most factors associated with the internal context are within the control of the organization or within its sphere of influence.
A risk breakdown structure is a hierarchical depiction of potential sources of risk by category. For the internal context this is known as the TECOP structure. TECOP is widely used by certified project managers. It includes the following categories of risk: technical, economic, commercial, organizational, and political. Deviations from processes and operations create additional opportunities and threats that must be considered in the internal context.
Organizations operating without a focus on sustainability/ESG seek to primarily control internal threats. In a financial environment, this is referred to as “internal controls. ”Changes in the internal context create uncertainty for the organization. Local leaders must manage the effects of uncertainty (i.e. opportunities and threats) to lower the risk to meet their objectives. An increased level of uncertainty is often associated with the inability of internal decision makers to obtain sufficient information about the context factor and the opportunities and threats associated with these factors. Uncertainty increases the risk to meet the objectives. Opportunities can contribute to the chances that the objectives will be met. Threats are likely to lead to chances that the objectives will not be met. The good news is that the opportunities can be used to offset the threats under many conditions.
Dr. Bob Pojasek
Sustainability Legend | ESG Reporting & Disclosures | Uncertainty Risk | Pollution Prevention Expert | Process Improvement | Organizational Sustainability Reporting | Sustainable Procurement Professor
Chairman, Education and Research Executive Board (EREB)
VCARE Academy Inc.
Center for Corporate Performance & Sustainability
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