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A Risk Management approach to
Climate Change
Theresa Mortimer-Audit/Risk Manager
Sara Armstrong – Senior Risk Management Advisor
Internal Audit, Risk Management & Insurance Services
Business Management Directorate
What questions do we now need to consider?
• Do you know what impact climate change could have on your area?
• Do your current policies, strategies and plans include provision for
the impacts of climate change?
• Can you identify and assess the risks from climate change to your
services?
• Are developments with a lifetime of more than 20 years required to
factor in climate change?
• Are you addressing climate change in your local Community
Strategy?
Is there a tool available to help me answer
these questions and help me prioritise my
limited resources?
Risk Management!
What is risk management?
 A central part of our strategic management.
 It is a continuous cyclical process whereby the council:
identifies,
assesses/evaluates,
controls: and
monitors
potential opportunities and adverse effects that challenge
the assets, reputation and objectives of the Council.
 It enables the Council to effectively manage strategic
decision making, service planning and delivery to
safeguard the well being of its stakeholders
What is Risk Management?
Risk
Management
Cycle
Assess
What type of risks do we face?
Risk and Opportunity Rainbow
Political
WHY DOES IT MATTER?
“.. I never saw a wreck and have never been wrecked, nor
was I ever in any predicament that threatened to end in
disaster of any sort”
from a paper presented by EJ Smith, 1907
On 14 April 1912, SS Titanic sank with the loss of
1500 lives... One of which was its captain… E J SMITH
IT MATTERS!
Environmental Risks
Drought
Climate Change Risks and Opportunities
Climate Change Risks and Opportunities
Markets: changing demand for goods and services
Risks:


Decreased or disappearing demand for present range of goods and/or services
Competitors position enhanced by climate change
Possible impacts:





Tourism; Mediterranean summer becomes too hot so more holidays taken in uk
Agriculture: More demand for warm weather food and drink products
Urban lifestyles: warmer summers encourage al-fresco eating, pavement cafes, siestas
Leisure: Less snow for winter sports
Hotter temperatures will put more pressure on leisure facilities such as pools and lidos.
Opportunities/Controls/Mitigation



New products or modifications to existing products
Become an early mover to changed markets and lifestyles
Undertake market research and product/service development with climate change in mind
Climate Change Risks and Opportunities
Finance: Implications for investments, insurance & stakeholder
reputation
Risks:
 Failure to climate proof creates difficulties in securing investment and/or insurance
cover
 Potential liabilities if climate change is not factored into long term decisions about the
future
Possible impacts:
 Insurance Policies: Check Insurers stance on undefended flood risks and impact on
premiums
 Future Developments: improved specification that takes account of future climate is
likely to be cost effective in most cases
Opportunities/Controls/Mitigation
 Evidence of climate proofing enhances reputation with all stakeholders, provides
security for investments and an opportunity to reduced insurance premiums
How has the impacts of climate
change affected
Gloucestershire County Council
in respect of Insurance?
What types of claims are we now seeing?
Long term dry conditions:
– Drought affects trees- roots cause subsidence to
properties and can create heave in pavements creating
slips trips and falls
Wet conditions:
– Flooding
– Drainage issues
Increase in wind speeds:
– Structural damage to buildings
Extreme cold conditions:
– Frozen pipes - escape of water
How much did the floods cost GCC in claims ?
£2.7m
The Cost of Risk!
For every £1 paid on an insurance claim,
between £8 and £36 is spent on hidden costs
Hidden Costs
 Lost production/work time following an incident
 Staff absence following an incident
 Administration costs following an incident
 Loss of information/data/knowledge
 Increased financial costs – reinstatement/continuity
Does risk management work?
 Drainage




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Tree Management Policy
Flood Resilience
Maintenance Programmes
Arson Prevention Programmes
Crime Prevention Programmes
Does risk management work?
Insuring Schools against flood/storm damage
 Risk Management and Insurance services (RM&IS)
used the risk management process to identify an
emerging risk during 2006/07 which related to flood
and water damage at schools. It was noted that the
increased ‘incidents’ and insurance claims relating to
this particular risk was significantly increasing.
 RM&IS decided to insure against this emerging risk.
This decision saved the council around £1.9m as
a result of the recent flooding within GCC schools.
Does risk management work?
•
“The tender document painted a positive image of the Authority and Marsh
are pleased to report that marketing the programme has achieved premium
savings of 24% on a like for like cover basis compared with 2007/08 and
22% premium savings taking into consideration increased cover.
•
In monetary terms this represented £402k savings on like for like cover and
£373k savings with the increased cover”. Source - Marsh (Insurance Broker)
•
In addition, the Insurer has provided £50k per year (over the next three
years i.e. £150k) to expend on risk management initiatives.
• The premium savings and risk management funding provided
are due to GCCs effective risk management
arrangements/invest to save projects undertaken and excellent
claims history.
Risk Management should:
 Form part of the strategic & operational business planning
process
 Be part of performance management
 Be part of financial planning
 Form part of project initiation and project management
processes
 Consider risks in relation to partnerships
 Inform policy and decision - making
Risk, Risk Management & BCM
BCM is a planned process aimed at managing the many and varied
operational risks inherent in the day-to-day activities involved in
delivering products / services.”
The main purpose of the BCM process is to ensure continuity of
product / service delivery following an unplanned disruption to normal
working.
Risk, Risk Management & BCM
CORPORATE GOVERNANCE
RISK MANAGEMENT
BCM
The overarching risks of climate change
to us all is the risk to our reputation as
a community leader and reliable
provider of products and/or services or
our ability to meet our statutory
responsibilities
The overarching opportunities of climate
change is to significantly enhance our
green credentials and Corporate Social
Responsibility
“Lets manage the risk not manage the damage”