Resilience of SMEs against extreme weather Bingunath Ingirige, Keith Jones, Gayan Wedawatta and Fuad Ali CREW Final Conference, RICS, London 25 th November 2011 Making climate change real – lessons from SME’s

Background Theory HouseholdsPolicy Makers Community Resilience SME’s Stake- holder Vulnerability Resilience Adaptive Capacity What do vulnerability, resilience and adaptive capacity mean to SME’s? What affects a SMEs response to extreme weather events? What can be done to better prepare SMEs?

Field study with SMEs Questionnaire survey involving 140 SMEs  Conducted with the assistance of Federation of Small Businesses (FSB)  Located in Greater London  Top management of the SMEs as survey participants Interviews with 12 SMEs  Mainly focused on flood risk  Majority were micro businesses (less than 10 employees)  4 had previously experienced a flooding event

Past Experience Sixty percent of respondents had experienced EWEs (2005 – 2009) Of these, 84% had experienced business disruption Very few of these had implemented coping measures Property level coping mechanismsOther strategies for business continuity Premises improvements19%Business data backup system23% Stock / equipment relocation7%Business continuity plan17% Flood defenses3%Reviewing property insurance for EWEs14% Relocation of business premises1%Business interruption insurance9% Planning for supply chain disruptions6%

Perceptions of risk Many believed that EWEs did not pose a significant business risk  This belief was higher amongst those who had experienced an event And that it is too costly and complicated to prepare for They mainly relied on insurance to recover if an EWE affected them Twelve percent did not expect assistance from anyone

Event Heavy rainfall (Flash) Flooding of workshop/outlet Consequences to the Business 6 Months without business Damage to business premises Damage to stock Loss of customer baseLoss of trading/income Cleaning and dehydration costs Repair and restoration costs Impact Case studies of SMEs – SME4 Affected by flooding, still no resilience measures except insurance Stock relocation costs Difficulties involved with assessing and claiming insurance

Event Heavy rainfall (Flash) Flooding of workshop/outlet Consequences to the Business 3 Months without business Damage to business premises Damage to stocks and equipment Loss of paperwork Delay in supplying orders Loss of trading/income Repair costs Increased Insurance premium Loss of records Complete damage not met by insurance Impact Case studies of SMEs – SME3 Affected by flooding, implemented resilience measures

Event Heavy rainfall (Flash) Flooding of workshop/outlet Consequences to the Business 3 Months without business Damage to business premises Damage to stocks and equipment Loss of paperwork Delay in supplying orders Loss of trading/income Repair costs Increased Insurance premium Loss of records Complete damage not met by insurance Impact Resilience measures Raised storage Online data backup system

Event Heavy rainfall (Flash) Flooding of workshop/outlet Consequences to the Business 3 Months without business Damage to internal premises Delay in supplying orders Loss of trading/income Repair costs Increased Insurance premium Impact Resilience measures Online data backup system Flood barrier Case studies of SMEs – SME3 Affected by flooding, implemented resilience measures Raised storage Damage to stocks and equipment Loss of paperwork Loss of records Complete damage not met by insurance

Challenge: Make the risks real Language is critical  Business find it difficult to recognise and interpret climate change stimuli and as such assess their vulnerability to future events. Business Continuity Planning is weak  Don’t see the need for any additional preparation. Personal attitudes are significant  Organisation’s find it difficult to assess the advantages and disadvantages of alternate adaptation strategies, which invariably have up-front costs associated with them. How much should you spend (time & money) preparing for an event that hasn’t happened and may might not happen?  Adaptation is business centric not climate centric  Need to phrase adaptation in terms of business risk

Risk Assessment Framework The risk assessment framework has been developed through a series of projects with private and public sector organisations to assist businesses assess their vulnerability, resilience and adaptive capacity to climate change. Then example is drawn from a social housing provider.

Current Conditions Examine recent history and identify disruption caused by extreme weather events Analyse each event and identify inherent vulnerabilities and resilience of the system (social, physical, economic, legislative).

Future Scenarios Develop future scenarios, based on climate change predictions, that cover the range of possible impacts of future events Assess vulnerability and resilience of existing systems against each scenario(social, physical, economic and legislative)

Risk Appraisal Rate each system component according to impact (matrix of vulnerability against coping capacity For high impact components identify what can be done to prevent disruption or improve the recovery process of the system Cost each measure (£, human resources, skills etc) Risk Appraisal

Contingency Planning Assess the ability of the system stakeholder to fund/manage the coping measure (quantify the absorptive/adaptive capacity) Prioritise coping measures to optimise absorptive capacity Develop adaptation plans

Integrate into building life cycle TSB project to integrate the risk framework into an adaptation strategy within the building life cycle.

Thank You - Questions