Ten climate risk questions every firm should ask

Your Risks

1. What are the operational impacts of climate change on your company?

- How are your supply chains and suppliers' operations affected?

- What are the implications for the price, supply and demand for commodities (e.g. agriculture, fisheries, minerals), and services (e.g. water, energy, telecommunications and IT)?

- How will international and internal security threats due to climate change affect your local labour supplies and supply chains?

2. Which of your company's key operating assets are located in areas vulnerable to climate change impacts and what are the implications?

- How long would it take and what costs would be involved to relocate and reconfigure key operating assets?

- What are the implications of depreciating, abandoning or writing-off assets before normal end-of-life?

- How will the value of your asset portfolio change over time?

3. How sensitive is demand for your products and services to climate change impacts?

- How will customer needs, buying behaviour and ability to pay, change and over what timescale?

- What steps have you taken to ensure that your current products and services remain viable?

- What are the implications arising from changes in the demographics of your customer base?

4. How could current and future climate change regulations and industry standards affect your organisation and its reputation?

- What is your level of regulatory and financial exposure to the introduction of prescriptive legislation on adaptation, together with further legislation on urgent
mitigation action as the reality of climate change becomes more pressing?

- How effective and auditable is your process for reporting regulatory and policy compliance?

- Which areas of your business are sensitive to media, NGO and local co mmunity concerns?

Your Opportunities

5. What new and enhanced existing products and services can you offer your customers?

- What steps are you taking to develop new or enhanced
business opportunities that will provide competitive leadership?

- How will you develop brand stretch to take advantage of changes in customer behaviours and develop climate related markets?

- Can you provide products and services that will help customers
predict, monitor, adapt, insure or recover from climate change?

6. What operational benefits could you enjoy from managing your response to climate change?

- How can you improve the attractiveness of your company to investors, banks, credit rating agencies, employees and potential recruits?

- How will you use the current economic crisis as an opportunity and an incentive to revisit your business model and respond to the growing social, environmental and economic challenges?

- What are the cost advantages if you can secure more favourable insurance cover by demonstrating strong operational risk management processes and a responsible climate-aware business?

Your Response

7. How clear and effective are your company's internal management responsibilities for climate change and your engagement with stakeholders?

- To what extent are your climate change leadership and management roles clearly defined, supported and empowered?

- How are you sharing knowledge with and informing governments, regulatory bodies, NGOs, and the media to manage and forecast exposure?

- What actions are you taking to ensure that the investment community, your bankers and insurers understand and support the steps you are taking regarding climate risk?

8. How well structured is your company's approach for managing climate change?

- How effective is your process for exploring longer-term scenarios and identifying
risks and opportunity signals as they emerge to plan and act accordingly?

- How are you assessing the vulnerability of your suppliers, assets, operations, workforce and markets to changing risks?

- What steps are you taking to ensure that climate-driven business risks and opportunities are embedded into your capital investment and operational expenditure decision-making processes?

9. How can you ensure your company's approach is based on robust information and assumptions?

- How have you integrated the latest available climate science, climate change scenarios to inform your business planning and decisions?

- Are your management information systems for assets, supply chains, operations, markets and customers reporting on and monitoring climate change KPIs using realtime, interconnected and intelligent data?

- Can your information systems provide an early warning of operational risk?

10. How can you demonstrate that your company's climate business resilience plans are realistic and financially viable?

- What actions have you taken to understand and manage future liquidity and ensure sufficient contingency funding?

- How do your business continuity and crisis management plans reflect the changing risk profiles due to climate change and are they well-rehearsed?

- What steps are you taking to involve your employees, implement new technologies, and develop new skills, expertise and cultural change?

© Copyright Acclimatise (Climate Risk Management Ltd) and International Business Machines Corporation, 2009.

Please contact Acclimatise or IBM if you would like to know more about the Prepare-Adapt questions.

The full Acclimatise-IBM report, Building Business Resilience to Inevitable Climate Change, is available here