Understanding climate change and the link to your operational risk

Climate change continues to be a growing global concern with extreme weather events occurring more frequently than natural variability suggests. Understanding climate change and developing a risk awareness for the potential impact of drought, flooding, extreme temperatures, and intense storms can help reduce potential disruption to your business.

Understanding “the risks of change” is vital to organizational and operational stability. Confront the volatility of weather by thinking big for the long term with your business analysis. Ask the right questions – for example, are we placing the new warehouse at the lowest part of the property?

Here are new climate change data points for consideration as you contemplate risk assessments for your business.

In order to understand how the climate is changing, it is important that you understand the distinction between climate and weather. Weather refers to atmospheric conditions over a short period of time, whereas climate is the average weather in a location or region for many years.

Climate is also defined by the range of weather conditions that have been observed in the past. The real difference between weather and climate is time.

How and why is climate changing?

 One of the first data points climate experts look at is the warming trend. Many datasets have been examined to construct an accurate history of the planet’s temperatures. On a global basis, warmer temperatures have been found to be more prevalent. While there is still some debate on the methods and quality of some of the measurements, there is clear evidence that shows the Earth’s surface temperatures have risen from the early 20th century. Estimates show that the global climate has warmed 1.4°F since 1901.

A second data point is how humans impact climate. One of the more significant influences includes land use changes. Modifications like deforestation, agriculture, and urbanization play a large role in altering the climate. For example, replacing a forest with urban developments can raise the temperature of the land due to higher heat absorption and retention rates.

Conversely, planting crops and expanding agriculture tend to cool the area, especially when irrigated. Practices such as deforestation also remove natural biological storage units of carbon dioxide. Keep in mind, sorting both natural and human-induced influences is an area of on-going research.

One clear effect of these changes is an increase in the number and frequency of volatile weather events. Volatile weather includes events such as droughts, floods, heat waves, and cold snaps that can have a significant impact on lives and property when they occur over large areas.  While these events have always occurred, the frequency and number of people they impact have increased dramatically in the past 15 years, although it is not clear if this increase is a result of changes driven by human activity, natural processes, or a combination of both.

Developing risk awareness data points

This is a high level look at the data behind the fact that more disruptive weather events have been happening and will likely continue to occur at an increased frequency over the coming decade.

From a business and planning perspective, we recommend greater risk awareness for the higher probability of increased weather volatility. Based on all available information at this time, further adaptation and preparation for greater risks is a reasonable course of action.

Read more in the “Essential Background for Understanding Climate Change and Associated Business Risks.”