 The effectiveness of a corporate governance system in any modern organization is also subject to a few other external factors. And the understanding of these external factors is equally important to understand the effectiveness of corporate governance structure across the corporate form. Partners and shareholders understand that there are few non-traditional factors that are much critical to the long-term sustainability of any corporate firm. And these non-traditional factors include environmental, social, and governance risk exposures. Financial institutions and investment analysts use these ESG analysis into their equity valuation and investment decency. Non-adherence by management of any corporate entity to these ESG factors means the probability of higher risk to the long-term sustainability of the company. These ESG factors may include climate change, labor policies, and the soundness of a company's governance structure. The first factor is legislative and regulatory risk. This means that there is a risk that any enactment of a certain law, rule, or regulation by the government may hinder a firm to operate as it desires or as it is already operating in a particular domain of business. For example, enactment through which the trading with a company or companies of a certain country may be prohibited because the government has declared that particular country an enemy now. Similarly, if a company is producing a product, the processing of this product is harmful to the environment of people who live in the surroundings of this particular company. Now any enactment regarding environment protection of the surroundings by the company may prohibit the company to operate further in this product. So these types of rules and regulations by a company may risk the continual operations of any particular company or all companies in a particular industry. It is notable that companies in industries are likely to be affected at least some degree by the rules, regulations, and laws made by the government. Dear students, investors who consider ESG factors while monitoring regulatory and legislative developments for the company, they follow. Such investors' financial and investment analysts would be more equipped to go for effective business operating financial and investment decisions. But the firms who fail to follow such regulations may face substantial loss in terms of sales revenue, in terms of profits, in terms of assets base, and finally in terms of market power. The second is the legal risk. This means the risk that if the management of a company fails to comply any rule regulation made by the government for environment protection, for labor protection, for shareholders, for the debtors, or any other stick holder, the company may face a lawsuit in this regard and the result may be a substantial loss of funds in terms of penalty imposed by the government on such company. We know that all areas of ESG lead to such lawsuits, for example, employees for work issues, shareholders for managers impairing the shareholders' value, government attorneys for infringement of state laws by the companies, and investors while analyzing the financial health of his company should analyze the potential for the riskiness of these legal implications for his or other particular company through reviewing the legal documents filed by the company in a particular jurisdiction in which that particular company prevails and conducts its operations. This gives a better understanding to the analyst that how much riskier is the company towards any lawsuit it may face. The investors should independently assess the company and the nature of its operations to judge such exposures in order to determine the potential effects upon the firm's operations, its profits, and its long-term sustainability. The next is the reputational risk. This means that if a firm in the past conducted any sort of irregularity or non-compliance towards any particular law, rule, or regulation, and this is made public then, the adverse effect of this may be that the investment value of the shareholder may have substantial diminution. And as a result, the market value of the equity held by the shareholders may down to the greater extent, operating risk. This means that a company's operations may be severely affected by ESG factors. Even to the requirement that one or more of the products or product lines or possibly are all operations of the company may come to an end. For example, we all know that the selling of cigarettes to buyers under the age of 18 is prohibited. We all know that the selling of all types of drinks and beverages is prohibited by the government in all educational institutions. So, this means that all those companies who are involved in manufacturing and selling of all these products have to curtail their operations to a greater extent. Financial risk. The risk that the ESG factors may result in a significant loss or cost to the firm. And definitely, as a result, this will reduce the shareholders' investment in their company.