Theresa Mortimer-Audit/Risk ManagerSara Armstrong – Senior Risk Management Advisor

Internal Audit, Risk Management & Insurance ServicesBusiness Management Directorate

A Risk Management approach to

Climate Change

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!

It is a continuous cyclical process whereby the council:

identifies, assesses/evaluates, controls: andmonitors

potential opportunities and adverse effects that challenge the assets, reputation and objectives of the Council.

A central part of our strategic management.

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?

ObjectivesObjectives

Iden

tify

Iden

tify

Mon

itor

Mon

itor

RiskRisk ManagementManagement

CycleCycle

Control

Control

AssessAssess

What is Risk Management?

What type of risks do we face?

Political

Economic

Social

Technological

Legislative & Regulatory

Environmental

CitizenGovernance

Information/Know

ledgeCom

petitive/Procurement

Part

ners

hips

Cont

ract

ual/

Supp

liers

Peop

le

Fina

ncia

lPh

ysica

l Ass

ets

Servi

ce Continuity

Health & Safety

Programme/Projects

Customer/Client

Fraud

Decision makingReputation

Risk and Opportunity Rainbow

“.. 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

WHY DOES IT MATTER?WHY DOES IT MATTER?

On 14 April 1912, SS Titanic sank with theOn 14 April 1912, SS Titanic sank with theloss ofloss ofOne of which was its captain…One of which was its captain…E J SMITHE J SMITH

IT MATTERS!IT MATTERS!1500 lives...1500 lives...

Drought

Flood

Extreme Rainfall

Storm

High Winds

Cold/Snow/Ice

Heat/SunFuel/Transport

Energy

Carb

on/G

reen

hous

e G

as e

mis

sion

s

Biod

iver

sity

Clea

n Ai

r/Po

lluta

nts

Serv

ice d

eliv

ery

Insu

rance

Financia

l

Legal

Market changes/demands for services

People/health & Social care

Procurement

Planning

Water

Environmental Risks

Waste

Climate Change Risks and Opportunities

Markets: changing demand for goods and servicesRisks: 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

Climate Change Risks and Opportunities

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

For every £1 paid on an insurance claim,

between £8 and £36 is spent on hidden costshidden costs

The Cost of Risk!

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

Hidden Costs

Drainage

Tree Management Policy Flood Resilience Maintenance Programmes Arson Prevention Programmes Crime Prevention Programmes

Does risk management work?

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?

Insuring Schools against flood/storm damage

• “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.

Does risk management work?

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 Management should:

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 MANAGEMENT

BCM

CORPORATE GOVERNANCE

Risk, 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”

“Lets manage the risk not manage the damage”