1 Climate change: risks and opportunities

1.1 What are the risks of climate change to businesses

Businesses can be affected both directly from climate change and indirectly through government policies. Risks can occur from the impacts of predicted climate change effects such as increased temperature, extreme weather events, disrupted ecosystems and flooding of land.

Specific types of affects to business could include:

• Increased electricity demand in summer due to air conditioning requirements and less in winter due to milder temperatures;
• Damage to facilities from increased number of extreme weather events;
• Water shortages;
• Flooding events and other natural disasters;
• Interruptions to supply of fresh produce and transport of livestock;
• Animal born infections e.g. swine flu;
• Changes in working conditions and working hours;
• Design standards;
• Insurance limited e.g. flooding and high volume of claims;
• Disaster recovery plans expensive;
• Commercial competition for resources;
• New ecosystems may require new skills.

These in turn may produce adverse business outcomes, from interruptions, costs and skill shortages depending upon the importance of each impact to the business.

The equation for defining risk is:

This equation will give an indication of the vulnerability of the business to the risk. This vulnerability can then be managed to a less vulnerable state.

This website [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] includes a presentation on risks to business of climate change.