Could sustainability-related risks cause an entity to lose its ability to continue as a going concern?
When identifying sustainability-related risks and opportunities that could reasonably be expected to affect an entity's prospects, there may also be risks that could affect its ability to continue as a going concern. For example, in the course of its operations an entity might accidentally harm nature or people, which could lead to significant reputational damage or put its licence to operate at risk, and could therefore affect the entity's prospects.
Our view:
An entity's operations may accidentally harm nature or people, which could cause the entity to suffer significant reputational damage or put its licence to operate at risk. When an entity applies judgement in identifying sustainability-related risks, it should consider both the likelihood and the magnitude of a risk. In such cases, an entity may conclude that, even though the likelihood of the risk occurring is low, the magnitude of its consequences means that it is a sustainability-related risk that could reasonably be expected to affect the entity's prospects.
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This publication is for general information only and is not a substitute for professional advice.