1. Module 2a Assessing Climate Change Risks
Country, Date, Presenter

2. Objective The objectives of this module are to:
gain an understanding of the concept of risk
learn about the different types of risk and their importance
comprehend the basics of an risk assessment and why it matters to businesses
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3. Businesss and Climate Risk Conceptualising Climate Risk
Outline / Agenda
Businesss and Climate Risk
Conceptualising Climate Risk
Risk Assessment
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4. I. Businesses and Climate Risk
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5. Managing the risks and opportunities of climate change
III. Businesses and Climate Risk – Adaptation as a form of risk management
Climate change adaptation =
Managing the risks and opportunities of climate change
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6. Discussion – Concepts and relevance of risks
Are you familiar with this concept ?
Which risk management tools do you use in your work with SMEs?
What is the relevance of climate risk for them?
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7. III. Businesses and Climate Risk – Overview of different types of risks
Risks of climate change for businesses
Source: McKinsey 2015
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8. III. Businesses and Climate Risk – Overview of different types of risks
Source: C2ES 2013
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9. III. Businesses and Climate Risk – Overview of different types of risks
According to a study by KPMG (2008), these are the most important types of business risk mentioned in relevant scientific research:
Source: KPMG 2008
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10. III. Businesses and Climate Risk – Overview on different types of risks
Source: KPMG 2008
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11. III. Businesses and Climate Risk – Risks
New risk:
Climate Change
SMEs face a range of risks and opportunities
Financial
Organisational
Legal and regulatory compliance
Reputation
Operational
etc…
Negative and positive consequences on the business
Company strategy, processes and assets affected
Cost benefits and new market opportunities
Need for a structured approach on how to assess and mitigate climate risks (Climate Expert)
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12. II. Defining Risk
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13. Task – What is risk? How would you define risk?
Please think of a short and concise definiton of risk and write in on a notecard.
Everyone shares his or her risk definition
Discuss the differences and similarities
Business risks from climate change are materializing rapidly, and it is fundamental to the success of companies to scrutinize how the consequences of CC will affect their operations, and plan for the risks that will have a significant impact on them
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14. II. Defining Risk – Two types of risk terms
Company
Water quantity
(water risk)
Physical assets
(physical risk)
Financial assets
(financial risk)
Risk affecting...
Risk resulting from...
Impact
(flood, drought, heavy rain risk)
Regulation
(regulatory risk)
Other
(…) risk
Climate change phenomenon
(climate change risk)
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15. II. Defining Risk – Terminology
Risk is often defined as probability (or likelihood) of occurrence of hazardous events multiplied by the magnitude of negative effects if these events occur.
Risks refer to the potential, when the outcome is uncertain, for adverse consequences on lives, livelihoods, health, ecosystems, economy, business, social activities, infrastructures, constructions, etc.
Source: Adapted from IPCC 2014
Source: UKCIP 2003
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16. II. Defining Risk – Likelihood and Magnitude
The probability or likelihood can be determined by looking at how frequent a climate event has occured in the past and then predicting its occurrence for the future.
The magnitude refers to the degree of the negative effects on the business. It can be determined by identifying which areas of a company (e.g. buildings, employees, etc.) are affected and then assessing how crucial they are to the company.
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17. II. Defining Risk – Risk terminology in the Climate Expert
Magnitude
Climate change phenomenon
Impact
Negative effect on the business
RISK
In the Climate Expert, a risk is the likelihood that certain negative business effects occur multiplied by the magnitude of the expected genative effects.
Likelihood and magnitude are determined by the nature of the climate phenomenon and its impacts.
Likelihood
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18. Negative effect on business Higher mean temperatures
II. Defining Risk – Examples of negative effects on the business
Example: Textile dyeing company
Phenomenon
Impact
Negative effect on business
Higher mean temperatures
Dyeing colors dry up more quickly
Increased costs for keeping color wet / buying new color
Groundwater level falls
Increased costs for obtaining fresh water for production
Shrinking of glaciers
Increasing water scarcity, new regulation to save water
Company has to pay fines if it cannot comply with new reg.
Heat waves
Staff feel dizzy and cannot concentrate
Reduced productivity, reduced output
Higher humidity
Textiles get moldy more quickly and smell
Negative customer feedback, loss of profit
Heavy rain & flooding
Premises get flooded
Costs for repairing damaged machinery & products
Transport routes are blocked
 Shortage of raw material supply, delivery delays
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19. II. Defining Risk – Risk terminology in the Climate Expert
Risks should be phrased using the expected negative effects on the business and the impact from which it occurs; for example:
Destruction of machinery due to flooding
Reduction of worker productivity due to heat wave
The climate change phenomenon does not need to be mentioned
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20. III. Risk Assessment
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21. Discussion – Dealing with uncertainty
Do you agree with the statements below?
How can you deal with uncertainty in the context of businesses and climate change?
“... it is clear that without certainty, we are unable to plan optimally for climate changes in the future.”
Source: C2ES 2013
“The high uncertainty concerning physical risks [of climate change] […] makes investment in adaptation plans potentially risky.”
Source: C2ES 2013
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22. III. Risk assessment – Dealing with uncertainty
Challenge:
It is often difficult to assess the likelihood of an impact as well as the specific negative effects on the business occuring from it
Potential solutions:
Consider experience and data from the past
Draw inferences from similar impacts
Use ranges
Work with different scenarios
Make your assumptions transparent
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23. III. Risk assessment – Risk matrix for prioritizing risks
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24. Experience from practice – Examples of Climate Expert implementation
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25. Discussion – Assessing Climate Change Risks
How do you deal with risks in your work with companies?
Do you find the risk approach presented compelling?
Would you feel confident in dealing with uncertainty related to climate risks in an adaptation assessment?
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26. Thank you for your attention!
Company Trainer 1 Telephone number address Homepage
Company
Trainer 2 Telephone number address
Homepage
Knowledge partner
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27. Sources
C2ES 2013: Weathering the Storm: Building Business Resilience to Climate Change. Available at final.pdf GIZ & adelphi 2013: Trainers Maunal. Facing the Impacts of Climate Change. Indian SMEs and Climate Change. Available at: KPMG 2008: Climate Changes Your Business. KPMG’s review of the Business Risks and Economic Impacts at the Sector Level. Available at: IPCC 2010: Managing the Risks of Extreme Events and Disasters to Advance climate Change Adaptation. Available at: reports/srex/SREX_Full_Report.pdf IPCC 2014: IPCC, 2014: Annex II: Glossary [Mach, K.J., S. Planton and C. von Stechow (eds.)]. In: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, pp McKinsey & Company 2015: How Companies can Adapt to Climate Change. Available at: productivity/our-insights/how-companies-can-adapt-to-climate-change UKCIP 2003: Climate Adaptation: Risk, Uncertainty and Decision-Making. UKCIP Technical Report. Available at: framework.pdf
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