A Risk Management approach to Climate Change

Theresa Mortimer Audit/Risk Manager 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?

Political Risk and Opportunity Rainbow

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!

Drought Environmental Risks

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      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

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”