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

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

Risk RISK = Hazard * Elements at Risk * Vulnerability

Outcome of good risk management 1. Understand – Avoid –Transfer - Manage Risks 2. Capture Opportunities

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

Source BP Statistical review of world energy 2007

Projections of the Peaking of Oil Production

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

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

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

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

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

The climate is changing, are you?