Business Risks and Opportunity fromClimate and Oil Vulnerability

Gareth JohnstonDirector, Corporate and Government Risk27th 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 productionTravel avoidance – robust high speed IT

Infrastructure to all homesRelocalisation of services – rural doctors

providing more servicesCollaborative resource sharing – libraries as

social hubs, work centresEducation and capacity buildingManufacturing – finding alternative feedstock

Frameworks for decision making

Climate Change NZ CCAIR Oil Vulnerability

University of Liverpool

Steps for business risk reduction

Data collectionDevelopment of complexity risk

modelsImprovements in stochastic modellingPolicy commitment from State and

Federal GovernmentSectoral Peak body activityAwareness and Capacity building -

University responsesWatch Swedish response

www.climaterisk.net

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