Climate Change Impacts & Risk Management

A Guide for Business and Government

Prepared for the Australian Greenhouse Office, Department of Environment and Heritage by: Broadleaf Capital International Marsden Jacob Associates, 2006

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Introduction

1.1 Purpose of this Guide

The global climate is changing, and will continue to change, in ways that affect the planning and day to day operations of businesses, government agencies and other organisations¹. The manifestations of climate change include higher temperatures, altered rainfall patterns, and more frequent or intense extreme events such as heatwaves, drought, and storms.

This document is a guide to integrating climate change impacts into risk management and other strategic planning activities in Australian public and private sector organisations. The purpose of this Guide is to assist Australian businesses and organisations to adapt to climate change².

The Guide is directed to:

elected representatives and directors who wish to ensure their organisations are aware of their risks from climate change impacts and that suitable management responses are put in place;
general management of organisations who need to understand the nature of the risks associated with climate change impacts and to know that these are identified and incorporated into processes for management and strategic planning; and
specialist risk managers or external risk experts who must apply risk management frameworks to ensure their organisations or those they are advising have identified and considered the risks of climate change impacts.

The Guide is consistent with the Australian and New Zealand Standard for Risk Management, AS/NZS 4360:2004, which is widely used in the public and private sectors to guide strategic, operational and other forms of risk management. The Guide describes how the routine application of the Standard can be extended to include the risks generated by climate change impacts.

1.2 Scope of the Guide

The Guide provides a framework for managing the increased risk to organisations due to climate change impacts. The prime focus of the Guide is on the initial assessment and prioritisation of these risks.

The Guide aims to help businesses and organisations:

enumerate risks related to climate change impacts;
prioritise risks that require further attention; and
establish a process for ensuring that these higher priority risks are managed effectively.

In most instances this initial assessment level of risk appraisal can be undertaken by people with a sound professional knowledge of the relevant organisation, together with a general understanding of the likely directions and magnitudes of climate change.

Climate change scenarios for risk assessment accompany this Guide. These scenarios have been developed by CSIRO for the Australian region using current best understanding of climate change and are designed specifically for use in the process of the initial strategic assessment of risks arising from climate change.

The Australian Greenhouse Office will update and extend these scenarios from time to time³.

The planning horizon suggested for this Guide is, in the first instance, a period of approximately 25 years hence. This coincides with the strategic planning horizon of many organisations and also with the investment period for many long-lived assets. Users of the Guide may however, choose to adopt an even longer-term focus - for example, climate scenarios can be constructed for 50 and even 100 years into the future using information that is easy to access.

The Guide is not intended to address:

risks associated with ‘normal’ variable states of climate; nor
measures and actions aimed at mitigating climate change itself, such as reducing greenhouse emissions or introducing emission trading schemes.

This Guide was developed through a series of case studies with four partner organisations, including a large private company, a public utility, a government agency and a local government. The recommendations in this Guide are based largely on the experience gained through these case studies.

1.3 Structure of the guide

The Guide is separated into three parts.

Part A describes what the Guide is about. In addition to the items covered in the Introduction, it discusses why there is a need to assess climate change risk (Chapter 2) and the fundamentals of risk assessment and management (Chapter 3).

Part B outlines how to conduct an initial strategic assessment centred on a workshop process. Chapter 4 describes the tasks and necessary steps that must be taken in preparation before the workshop. Chapter 5 describes the workshop process itself and how to effectively identify, analyse and evaluate the risks to the organisation arising from changes in climate. Chapter 6 describes the actions and responses required post-workshop in order to treat the identified risks. It notes that the ‘treatment’ of risks may involve more detailed analyses of some specific risks.

Part C deals with other considerations. Chapter 7 briefly outlines some of the considerations that arise if a more detailed analysis of some specific risks is required. Chapter 8 sets the risk assessment in the broader context of strategic planning and management, and therefore deals with the wider questions of the preparation, planning and integration of the risk assessment in an organisation’s normal processes for planning and management.

A summary checklist of tasks and hints and a glossary of climate change and risk management terms are provided as appendices.

¹ We use the term ‘organisation’ in this Guide to include public sector agencies, semi-Government businesses, private companies and communities.
The general approach to climate change risk management is the same for all kinds of organisations, although there may be differences in detail.
² It is not concerned with policy and other actions aimed at mitigating the extent or speed of climate change.
³ Thus, most organisations seeking to apply this Guide to undertake an initial assessment of risks do not need to develop their own climate change scenarios or to draw on external expert support on climate change science.