Companies today are facing a changing risk landscape as political and regulatory environments begin to address the many challenges associated with resource scarcity and global climate change.
In fact, in a new survey from Zurich Financial Services Group, Ceres and the Professional Risk Managers International Association (PRMIA), thirty percent of the corporate risk managers polled said climate change regulation was one of the top five risks facing their company.
But, what are organizations doing to mitigate their exposure?
“It’s clear that risk managers are conscious of risks posed to ‘business as usual’ by climate change,” says Lindene Patton, chief climate product officer for Zurich Financial Services Group. “Now it is time to convert that knowledge to risk management action.”
The report recommends risk managers take the following steps to learn more about what these evolving risks mean for their business:
- Tap into emerging expertise on evolving climate risks to understand their possible exposure.
- Communicate to all critical decision makers their organization’s potential exposure to climate risk.
- Consider whether the management structures and performance metrics in their organization are adequate for managing emerging climate risks.
As the report points out, there are several different types of climate risk, including: regulatory risk, physical risk, competitive risk, legal risk and reputational risk. The survey revealed that regulatory risk and its potential costs are of the highest concern.
It’s also worth noting that the survey uncovered a striking unevenness in the responses to some questions. For instance, while a quarter of respondents indicated “no one” is responsible for managing climate risk at their company, many risk managers reported that oversight of climate risk management is handled at senior levels. Also, only about 3 percent of those who reported legal or regulatory risk to be very or somewhat likely judged their existing Directors and Officers liability coverage to be adequate. Inconsistencies like this suggest risk managers need to start working now towards a better understand of the business threats posed by climate change and resource scarcity.
You can download the 35-page report, “Climate Change Risk Perception and Management: A Survey of Risk Managers,” here.