Is Climate Change an Emerging Risk for Business Continuity?

From active war engagements to rising gas prices and more cyber breaches, 2022 is off to a sobering start in terms of increased operational risks for organizations of all sizes around the globe.

BC Management’s 2021 Event Impact Report highlighted a number of these concerns and the roles they play in affecting operational resilience. As in previous years, the report indicated that human and business disasters were areas of concern for top disruptions, as well as technical disasters, weather events, and accidents.

The top 10 potential disruptions shared in that report included:

  1. Cyber-attacks
  2. Power outages
  3. Data breaches
  4. Network/communication outages
  5. Pandemic/diseases
  6. Computer viruses
  7. Brand/social media damage
  8. Hurricanes
  9. Fires (not natural)
  10. Earthquakes

Other reports highlight similar emerging risks, with climate risks and weather events often taking the top spots.

For example, the 15th Annual Emerging Risk Survey sponsored by the Joint Risk Management Section (JRMS) of the Canadian Institute of Actuaries (CIA), the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA), released earlier this year, indicated climate change as the emerging risk leading respondent concerns.

Climate change ranked number one for 58% of responding risk managers, up from 50% the previous year and more than double what it was just five years ago. These risks include tropical storms and wildfires among other weather events.

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Similar to the Event Impact Report, other areas of emerging concerns expressed by risk managers include cyber risks, financial volatility, demographic shifts, and disruptive technologies.

And while understanding potential emerging risks is essential for effective, proactive resilience management planning, the Emerging Risk Survey also took a closer look at what risk managers see as current top risks. As one might expect, at the time of the survey, which took place at the end of 2021, the pandemic led the list.

The top five current risks in the report include:

1. Pandemics/infectious diseases (27%)
2. Climate change (16%)
3. Financial volatility (10%)
4. Cyber/networks (8%)
5. Asset price collapse (7%)

It’s not surprising to see climate change and natural disasters at the top of both lists, as many organizations have had to manage these types of disruptions while also balancing pandemic response.

The Cost of Climate Change

AON recently shared similar data in its 2021 Weather, Climate and Catastrophe Insight report, where it cited economic losses from natural disasters at more than $340 billion last year.

In the U.S., in 2021, the report highlights that there were 23 individual events that resulted in economic losses greater than $1 billion. Among some of the more notable events were Hurricane Ida, western wildfires, and severe convective storms.

Globally weather events such as floods, wildfires, cyclones, and earthquakes caused disruptions last year.

But even with these emerging and current risks that threaten operational resilience, many organizations don’t include the potential for severe weather in their disaster response planning. While the reasons are vast, often it’s because the organization has never experienced a specific disaster type, so they don’t think it’s worth planning for. Yet, we know from our clients that the most successful organizations don’t turn a blind-eye to event potential. Instead, they develop proactive, responsive, and flexible plans that can help them respond to, mitigate, and adapt to any disruption type, even unexpected natural disasters.

Preparing with Plausible Scenarios

If your organization is of the “it’s never happened, why worry” mindset, you might find it helpful to involve your resilience management teams in plausible scenario exercises.

By focusing attention on plausible scenarios during your operational resilience planning, your organization can be better prepared to deal with a range of potential disruptions, such as those caused by the pandemic or climate change, and be prepared to activate those plans at any time.

Castellan’s Plausible Scenario Builder is a great resource to help with this process. Within this informative and easy-to-use guide, you can learn about a five-step framework that will help you better understand scenarios that may create risk for your important business processes.

Here’s a quick overview of those five steps:

  1. Research
  2. Identify Worries and Vulnerabilities
  3. Create Scenarios
  4. Map Scenarios
  5. Consolidate and Endorse

The Plausible Scenario Builder will also give you the tools you need to communicate your program goals and objectives—and why it’s needed and what could happen without it—to your executive leadership and key stakeholders in a language they understand. One that takes into consideration your operational resilience needs as well as your organization’s goals and objectives. It’s a simple way to improve your readiness capabilities for emerging and current risks for disruptions.

Want to know more about how plausible scenarios can help your organization prepare for climate and other operational risks? Check out our on-demand webinar, “Defining Plausible Scenarios: A Core Component of Operational Resilience,” to learn more about what a plausible

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