Using risk management to help you address climate change

Overview

Organisations that apply their existing risk management framework to analyse climate change risks will be better equipped to manage these risks. They’ll be able to consider and address the impacts that affect them, address government expectations and make more informed decisions. By managing their climate change risks, they’re adapting to a warming world.

If you’re new to the risk process, or need a refresher, see our topic on Identifying, analysing and evaluating risks. In this guide, we’ll give you tips on how to apply that risk process to climate change.

Download the PDF version of this topic [PDF, 843KB].

On this page

• When do you need to do the assessment? 
• Set the right scope and timeframe.
• Applying your existing framework is applying the risk management standard.
• Identify your climate change risks.
• Analyse your climate change risks.
• Record and report your climate change risks.
• Next steps.

When do you need to do the assessment?

Assessing climate change risks should be treated like every other risk. Start by assessing your climate change risks according to your existing framework. Assessments would typically occur when you and/or other members of your organisation:

• develop or update business plans or projects
• consider decisions that materially affect the organisation’s objectives, functions, and activities
• develop or review a strategy
• review organisational risks (e.g. the content of risk registers).

Set the right scope and timeframe

Before carrying out risk assessments, you need to prepare. This involves deciding which part of your organisation you’ll look at, what’s included and what’s out-of-scope.

Many organisations typically develop plans for the next two to five years and identify risks over the same period. Make sure your scope includes potential climate change risks beyond your normal planning timeframes.

Your aim is to highlight the most important climate change risks affecting your organisation. These questions can help you set your scope:

• Which specific area of your organisation (objectives, regions, functions, teams) are you going to focus on?
• Use the Victorian Climate Projections to find out how the climate will change your region and use our topic, Exploring Victoria’s climate change risks, to explore potential physical and transition risks. The projections might not address your risks in detail and further analysis might be necessary.
• How does your organisation currently contribute to climate change, both positively and negatively?
• What data do you need to understand your exposure to physical and transition climate change risks? This could include records of your: 
• buildings, infrastructure and equipment – locations and vulnerabilities
• staff, volunteers and the community you serve
• energy consumption and emissions
• dependencies on third party providers
• business and strategic plans
• environmental and sustainability plans.
• Who do we need to consult with to gather and validate this information?

Quick tips: You can help to raise the profile and your organisation’s understanding of climate change risk by equipping your risk owners in each business function with training or information-sharing. We’ve prepared this informative climate change risks presentation [PPTX, 286KB] that you can use to start your risk conversations.

Applying your existing framework is applying the risk management standard

We’ll take you through the process recommended by the risk management standard ISO31000:2018 to show how to consider climate change risks and identify where you might need to tailor your existing approach.

To learn more about identifying, analysing and evaluating risks, read our tools on Designing processes to manage risk.

Identify your climate change risks

There are two ways to identify the climate change risks you’ve defined within scope:

• describe specific climate change risks affecting your business objectives
• apply the foreseeable effects of climate change as a multiplier on your existing risks (shown in Exploring Victoria’s climate change risks).

To describe a specific risk, use our Exploring Victoria’s climate change risks guide and work with relevant managers and executives. Begin by identifying the event that, if it happened, could affect their plans. Events can include chronic risks – future situations that unfold slowly, such as temperature or sea level rise – not just specific events.

• Example - physical risk

  Sharif is a risk manager for a health service who meets with medical staff to identify physical risks of climate change. They identified that over the past decade, heatwaves had led to a spike in patients presenting to the hospital with illnesses, such as dehydration. An increase in the frequency and severity of heatwaves could push the service beyond its current capacity, resulting in harm to patients and liability for damages.

• Example - transition risk

  Liying is the CEO of an agency that set targets to significantly reduce its carbon emissions within five years. She asked her executive team to come up with energy efficiency and emissions reduction plans for each business function. As part of this planning process, each executive identified the main risks to achieving these targets and the impacts of these plans on existing operations.

  In both of these examples, organisations may also identify liability risk including:

  • increases in claims raised against organisations perceived as ‘responsible’ for causing or contributing to physical climate change events (i.e. flooding)
  • where institutions and Boards haven’t adequately considered and responded to climate change impacts.

  For additional information, refer to VMIA claims guidance:

  How key risk indicators help you manage risk

  Minimising your exposure to insurable risk