Most small to medium sized enterprises and, indeed, many large organizations lack the resources and capacity to fully implement a catastrophe model of their own (though open-source Cat model applications are freely available to those with the courage!).
However, understanding the relationship between hazard, exposure, vulnerability and loss can still be useful when thinking about, identifying and ranking risks within any organization. You can start identifying your climate-related risks, for example, by asking yourself questions like these:
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Module
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Questions to consider…
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| Hazards |
- What climate-driven hazards have occurred here before that could threaten assets or disrupt operations?
- How often have they occurred in the past?
- What climate-related elements drive those hazards (e.g., temperature, precipitation…)?
- How are anticipated climate changes expected to affect the frequency and intensity of the hazard in the future?
- What other elements of the value chain (suppliers, employees, customers, infrastructure) might be exposed to climate-related hazards
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| Exposure |
- Which elements of the value chain are in proximity to potential hazard? For example…
- Locations within a flood plain or low-lying coastal area?
- Locations near to an urban/wildland interface?
- Locations near to or within areas prone to tropical cyclone
- Locations at risk of excessive hot days or drought
- Locations on unstable slopes
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| Vulnerability |
- What is the capacity to take defensive actions to protect property (e.g., temporary barriers against flooding, rapid relocation of inventory)?
- What level of redundancy (e.g., in suppliers, in production sites, etc.) is in place?
- What emergency supplies are on hand (e.g., excess inventory)?
- What emergency services are available in the event of a disaster, and what is their capacity?
- What is the likelihood of a hazard great enough to destroy all assets?
- What is the likelihood of a hazard great enough to disrupt operations for 1 day? 1 week? 1 month? 6 months?
- What are the terms, coverage, and limitations of current insurance policies? How much loss is insured?
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| Damage |
- What is the total value of assets at risk?
- What is the present value of future income that those assets can generate?
- How much income is generally earned on each day of operations?
- What are the costs of downtime (in terms of sales, productivity, and reputation losses and recovery costs)?
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Even without quantifiable data on the probability and extent of losses, the Cat model framework highlights two important elements:
- Shifts in the hazard function brought about by climate change will, in many cases, result in an increase in the probability and extent of losses.
- Climate adaptation strategies that target exposure and vulnerability can offset the increase in the hazard function, reducing the losses associated with climate risks.