An organization usually operates within a socioeconomic structure that is determined largely by management and comprises the “operating environment,” both internal and external to the organization.
Managing an organization is not an ‘objective’ thing, it is subjective to who you are, who you know, what you know and what you can do in terms of capabilities and resources. Do you want to: engage in social or green entrepreneurship; do something in social media; construction; fashion or something completely different? What impact would you like to make? How do you define success? Is it profit, social engagement, lower carbon footprint, or is it something else that drives you?
Organizational context includes every asset, liability, strength, weakness, preference and belief you and your team possess. So then context is the totality within which the organization seeks to achieve its sustainability goals.
The internal context includes, but is not limited to: product and service offerings; management, organizational structure, roles, and accountabilities; regulatory requirements; policies and goals, and the strategies to achieve them; assets (e.g., facilities, property, equipment and technology; capabilities, understood in terms of resources and knowledge (e.g., capital, time, people, processes, systems, and technologies); information systems, information flows, and decision-making processes (both formal and informal); relationships of the staff/volunteers/members and the perceptions and values of their internal stakeholders – including suppliers and partners; company culture; standards, guidelines, and models you have adopted and form and extent of contractual relationships. Internal context can also be defined as anything within the organization that may influence the way you manage internal risks.
You need to conduct an internal analysis using “SWOT” (Strengths, Weaknesses, Opportunities and Threats) analysis or some other similar tool.
External context includes: outside stakeholders, local operating environment and any external factors that influence the selection of objectives (goals and targets) or the ability to meet those goals. Once the internal context is documented, you now need to conduct an external analysis using “PEST” (political, economic, social and technological) analysis or some other similar tool.
Completing a PEST analysis is simple and helps you understand and find ways to deal with the external context. Political factors; economic factors; ecological/environmental issues; national economies and trends, current legislation, general taxation issues; anticipated future legislation; taxation to activities, products, services; International legislation (global influences;) seasonality or other weather issues; regulatory bodies and processes; market and trade cycles; government policies; terms and change; specific sector factors; funding, grants, and initiative; customer/end-user drivers; market lobbying groups; interest and exchange rates; wars and conflicts; international trade and monetary issues; social factors; technology factors; lifestyle trends; competing technology development; demographics; associated/dependent technologies; consumer attitudes and opinions; replacement technology/solutions; media views; maturity of technology; law changes affecting social behaviors; information and communications; reputation of the organization; consumer buying mechanisms; consumer buying patterns; technology legislation; fashion and role models; innovation potential; major events and influences; technology access, licensing, patents; buying access and trends; intellectual property issues; ethnic/religious factors; global communication; advertising and publicity; social media use; ethical issues; maturity of organization’s products should all be considered. Although you cannot control these environmental factors you need to manage them to your advantage. You also need to protect yourself from PEST factors which may increase operational costs or affect your reputation.
The above analyses determine which factors can influence how the organization operates. You cannot control these factors, but you must seek to adapt to them.
Context determines the drivers of influence and priority for all stakeholders so understanding context is the first step in defining the internal and external factors that you must consider when you adopt Risk Based Thinking which we will discuss in an upcoming post.