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Risk

Business Risks and Opportunity from C limate and Oil Vulnerability Gareth Johnston Director, Corporate and Government Risk 27 th June 2007.

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Risk

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  1. Business Risks and Opportunity fromClimate and Oil Vulnerability Gareth JohnstonDirector, Corporate and Government Risk27th June 2007

  2. Climate Risk provide specialist risk management services to business, government and communityOur mission is to help clients build adaptive capacity, deliver adaptation actions and secure competitive advantageOur values are integrity, pursuit of excellence and a commitment to continuous development

  3. Risk RISK = Hazard * Elements at Risk * Vulnerability

  4. Outcome of good risk management1. Understand – Avoid –Transfer - Manage Risks2. Capture Opportunities

  5. Similarities between Climate and Oil Vulnerability • Emergent risk • Highly Complex with Increasing Uncertainty • “Adaptive” problem • Consumption signature - population and lifestyle • Non linear • Difficult to respond to from a technical perspective • Challenging for government decision making • Requires long term planning and quality risk management • Threatens vested interests and “business as usual” • Impacts vary widely across temporal and spatial domains • Media driven controversy highlights lack of homogeneity of views • Infrastructure sunk costs constrain decision making • Global issue with disproportionate impacts • Requires new thinking and “radical” change • Past does not equal future • Military conflict increasingly likely with extreme impacts

  6. Source BP Statistical review of world energy 2007

  7. Projections of the Peaking of Oil Production

  8. Climate and Oil Vulnerability corporate risks • Direct Physical Risk • assets and investments, transport, feedstock insurance cover, depreciation risks, Business continuity management systems, operations and human capital • Regulatory Risk • compliance with an evolving regulatory environment such as planning codes, regulated industry standards and corporate governance issues i.e.ASX, CLERP 9, SOX risk disclosure compliance. Emissions liabilities as well as impacts or adaptation regulation. Efficiency measure compliance • Market and Competitiveness Risk • Including changing markets, loss of profit with respect to competitors and the effects of the changing relative value of assets based on exposure to primary (direct) and secondary (market adaptation) climate change impacts. • Litigation Risk • Including the liabilities associated in inadequate disclosure by/ to trading partners of associated climate change risks, oil vulnerability disclosure or inadequate preparation of a commodity for oil vulnerability and or climate change. Multi-decadal assets such as property and infrastructure most at risk. • Reputation Risk • Including the market perception of a failure to act or adapt to climate change and oil vulnerability impacts and expected regulatory evolution. • Emergent Risk • new and future risks i.e. cocktail effects such as oil vulnerability and climate change

  9. Vulnerable Sectors • Infrastructure and construction • Tourism • Agriculture • Service industries • Manufacturing • Medical Services • Education • Corporate travel

  10. Opportunities • Public Travel as a priority – smart ticketing infrastructure, RFID, Near field communication • Agriculture – local organic production • Travel avoidance – robust high speed IT Infrastructure to all homes • Relocalisation of services – rural doctors providing more services • Collaborative resource sharing – libraries as social hubs, work centres • Education and capacity building • Manufacturing – finding alternative feedstock

  11. Climate Change NZ CCAIR Oil Vulnerability University of Liverpool Frameworks for decision making

  12. Steps for business risk reduction • Data collection • Development of complexity risk models • Improvements in stochastic modelling • Policy commitment from State and Federal Government • Sectoral Peak body activity • Awareness and Capacity building - University responses • Watch Swedish response

  13. The climate is changing, are you? www.climaterisk.net

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