Understanding Time Horizons
Andrew Lingley avatar
Written by Andrew Lingley
Updated over a week ago

Knowing the timeframe in which a risk could materialise is an important part of risk management.

In ESG materiality assessments, capturing and reporting on Time Horizons is the process of identifying and communicating the timeframes over which ESG issues are expected to manifest and impact a company's operations, stakeholders, and long-term sustainability. These Time Horizons tend to be longer than the time horizons set for regular business risks.

For Time Horizons, we recommend using the Double Materiality conceptual guidelines for standard-setting outlined in the European Sustainability Reporting Guidelines by the European Financial Reporting Advisory Group (EFRAG).

How do you apply Time Horizons accurately?

By conducting a time horizon analysis, you will evaluate the potential timing of each risk's materialisation based on its nature, underlying factors, and triggers. Some risks may have immediate or short-term impacts, while others may develop gradually over the medium or long term.

How are Time Horizons categorised?

To assign Time Horizons to each Risk, select from the following options:

  1. Short term

  2. Medium term

  3. Long term

  4. To be confirmed

Short-term Risks: These Risks have immediate or near-future impacts, usually within a year or less. They often involve operational issues, market fluctuations, or regulatory changes that can affect day-to-day activities and short-term goals.

Medium-term Risks: These Risks have an impact over a timeframe of one to five years. They may include strategic risks, such as shifts in market trends, technological advancements, or changes in consumer behaviour that can affect the organisation's competitiveness and long-term performance.

Long-term Risks: These Risks unfold over a period exceeding five years, potentially stretching to decades. They often encompass systemic risks, such as demographic shifts, climate change, geopolitical instability, or emerging technologies, which can profoundly impact the organisation's sustainability, resilience, and strategic direction in the long run.

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