Managing Climate Risk

Many organisations still do not consider the changing climate to be a serious risk to their operations, their suppliers and their customers. But climate risks are real and in some cases significant, presenting a threat to profitability and continuity.  The risk management process does not have to be difficult or disruptive. Most companies will already have generic risk processes in place. However, this paper draws attention to some specific issues that arise when considering climate risks. For those organisations that do manage their climate risks effectively, and bear in mind these characteristics, there will be both immediate and longer-term benefits.

The weather can affect operational performance in many different ways. A recent global survey ¹ by the Business Continuity Institute indicated that, during 2009, adverse weather was the third highest cause of business disruption, after swine flu and information and communication technology (ICT) disruption.

Some organisations are poorly prepared to deal with weather risks now. They certainly won't be prepared for more severe or different risks in future. Continuity planning may help them respond to the consequences of adverse weather, but this often assumes that past experience is a reliable indication of potential future weather risks. With growing evidence of how the climate has already changed, and larger changes anticipated in future, such assumptions will only provide a false sense of security.

¹ ‘The Business Case for BCM', Summary report of the global survey of BCM practitioners, published in March 2010 by the Business Continuity Institute, available from www.thebci.org. 94% of responding organisations experienced some level of disruption over the past 12 months. The top five events by levels experienced were: 1. Swine flu, 2. IT and/or telecom disruption, 3. Adverse weather, 4. Lack of energy supply, 5. Computer virus / cyber attack.