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Business Environment

Environmental Impact and Analysis

In many ways, an organization is like a human being and function within an environment. The success of a business depends on the way it responds to its environment. An organization must identify various aspects of its environment, respect it, and adapt to it. Hence, for a business to prosper, it is important for the organization to conduct an environmental impact assessment and respond to it optimally.

A business depends on its environment for acquiring inputs and disposing of outputs for the benefit of itself and the environment.  This is a continuous process and requires constant interaction with the external environment.

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Environmental Impact Assessment Framework

Let’s look at the framework that will help us conduct an environmental impact assessment effectively, identify risks and coping mechanisms for organizations.

  • To begin with, assess the uncertainty of the organization’s environment. Is it static or changes with the environment? Is the environment simple or complex? This initial understanding can help the business determine the focus area of environmental impact assessment.
  • Next, audit the influences of the environment on the business
  • Try to identify the aspects of the external environment that impact the organization’s performance or development
  • Focus on an explicit consideration of the external environment of the organization
  • You also need to focus on the competitive environment of the business

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Environmental Analysis

Environmental Impact AssessmentSource: Pixabay

If a business does not respond to the demands of its external environment by making changes to its strategy, then it can experience a decline in performance. An environmental impact assessment or analysis allows organizations to anticipate opportunities and plan responses to them. A solid analysis can also help an organization to recognize threats before time and counter them or even turn them into opportunities.

While all future events cannot be anticipated by analysis, there are some that can be predicted equipping the management to make better decisions. It also helps the decision-makers to focus on relatively fewer factors of its environment.

A comprehensive analysis of the external environment must have the following goals:

  • Offer a detailed understanding of the current and possible future changes in the environment. While it is important that an organization is aware of its current environment, having a long-term perspective of the future is equally essential.
  • Data collection is not the sole objective. Environmental impact assessment must offer critical inputs to assist strategic decision-making.
  • Also, it must foster strategic and fresh thinking in organizations
  • Offer a better understanding of the context within which the firm operates

Solved Question on Environmental Impact and Analysis

Q: List the factors that contribute to the framework of environmental impact assessment.

Answer: The factors are as follows,

  • Assess the uncertainty of the organization’s environment to help understand the areas where you must focus on while conducting the analysis
    • Determine if it changes with the environment or is static in nature
    • Assess the complexity of the environment
  • Audit the influences and determine the impact of the environment on the business
  • Isolate the individual aspects of the external environment which influence the development and/or performance of the business
  • Further, focus on an explicit consideration of the external environment of the organization
  • Also, take the competitive environment of the business into consideration
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