news

Attention to supply chain risk management is critical for multinational corporations, as the Thai floods and Japan earthquake and tsunami of 2011 demonstrated.

 

Climate change will bring about a transformation in business as companies seek to manage hazards we expect will intensify and become less predictable. Yet companies that take only a defensive position are likely to lose out to those that see opportunities to help reduce the adverse effects of climate change and allow us to adapt to a climate-changed world.

Ferma Board Member

Ferma Board Member

Risk managers play a pivotal role in helping their companies manage risks as they evolve and climate change has been rising steadily up the agenda for directors and senior managers. At the enterprise level, our companies face increasing demands from shareholders and other stakeholders to understand the implications of climate change for the individual business. At operational level, we have to work with our colleagues to analyse the specific ways a changing climate will affect us and how we can manage those risks.

Scientists are convinced the negative impacts of climate change will mean more extreme weather: fiercer storms and more floods and droughts. Making the company more resilient to these perils as they become more severe and less predictable is at the heart of the risk manager’s job. There is a range of tasks involved from strategic planning to tailoring the insurance programme to respond to a shifting risk profile. Attention to the resilience of our supply chains is critical, as the Thai floods and Japan earthquake and tsunami of 2011 showed us.

A global issue

The scope has to be worldwide. Climate change is a global issue and many of the 4,300 members of the Federation of European Risk Management Associations (Ferma) work for global companies. Even those who have a primarily national or regional focus can be affected by events across the world through their supply and distribution networks.

In South Africa, for example, a rise in storms and hailstorms in the past year caused massive damage – with insured losses of more than €69m ($93.9m) – and led insurers to question whether they were indicative of fundamental changes in global weather systems. At a forum summoned urgently by the country’s insurance industry in May, Dr Deon Terblanche, from the UN World Meteorological Organisation, said: “A growing and urbanising global population and a warming climate imply greater exposure to extreme weather events, including hailstorms. There is an urgent need for improved techniques to observe and predict these events and for the financial tools to build resilience.”

The third aspect to managing climate change usually receives less attention and that is the opportunities our companies have to innovate, creating competitive advantage by developing more energy-efficient products and services for their own use and possibly for commercial value. These projects naturally involve risks that need to be managed as a normal part of running the business.

In the face of such fundamental shifts in the risk environment, we need a clear vision of how climate crunch will affect companies and their ability to reach sustainable growth. For this reason, Ferma has asked Danish meteorologist and climate expert Jesper Theilgaard to be the keynote speaker at our seminar in October in Brussels. His expertise will help us play our role in this process.

Helle Friberg is a board member of the Federation of European Risk Management Associations and group risk and insurance manager of Hempel A/S 

© Copyright June 2014 Issue 4, 130, insuranceday