Climate Change Skepticism: Breaking the Rules of Risk Management
- by Nigel George. First published: 9th February 2009
Being skeptical of the things we hear in the media is a good thing, but ignoring climate change, considering the risks we face, is throwing good business risk management practices out the window.
Key Points
- Climate change will or won’t happen regardless of what you believe.
- There is opportunity in reducing potential risks and great danger in ignoring them.
- The Daily Pragmatist must take a risk management approach.
The Climate Change Debate
This is actually a misnomer – scientist haven’t disagreed that the climate is warming for 20-odd years. Despite those who have a vested interest in pushing the contrarian wagon, most of the 'debate’ in science is about how much trouble we are in.
Most of what we hear in the media is political and social debate – which has precious little to do with the underlying scientific understanding.
While this serves as a basic introduction to the background noise on the issue, it should have nothing to do with how you, as the Daily Pragmatist deals with climate change risk.
Climate change will (or won’t) happen regardless of what you believe. Most likely we will look back on this in 20 years and find that both sides were partly right.
What should matter to the Daily Pragmatist is how potential climate change fits into our usual business risk management.
Risk Management 101
To quote the AS/NZS 4360 Risk Management Standard:
'Risk management involves managing to achieve an appropriate balance between realizing opportunities for gains while minimizing losses’
Back to this in a minute.
Lets frame our discussion into a simple 'us and them’.
If mainstream science is wrong we will have:
- Cleaned up the air in our cities.
- Stopped stripping our forests.
- Stopped polluting our rivers, lakes and oceans.
- Stopped generating billions of tonnes of crap that just gets buried or burnt.
- Created new and innovative technologies, grown as a race and learnt how to not trash the place.
- Preserved our businesses and our planet so that our kids and their kids have something to build on.
.....all for nothing. OR:
If the skeptics are wrong, sometime in the next few generations:
- More than half the world’s population will be displaced by rising sea levels.
- All our river and water systems will fail.
- Our forests will be mostly gone.
- We will run out of space to bury crap.
- Life for our kids and their kids will be a whole lot more difficult that ours.
...all for nothing??
Back to our standard here – 'realizing opportunities’.
Go back to list one.
Tell me which items on this list represent an opportunity?
Full marks for those who say 'all of them’.
Minimising Losses
You insure your business right? You insure your home?
What are the actual chances of either of them burning down, or some other calamity where you have to start again?
How much does your insurance cost?
Bottom line is that most of us pay much less than 5% of our income to insure our personal stuff, and in business it is seldom more than 10% of revenues – only that high if you have big risks and/or workers compensation issues.
All of the estimates coming back from economists globally state that mitigating climate change effects are less than 2% of GDP if we act now. Yes economists are not the most reliable of professionals, but back to risk management – what are the balance of probabilities telling you?
Taking Action
Turn off the TV. Put down the paper. Ignore all that noise.
Put on your risk management hat and think:
- What is an acceptable risk to us?
- What is our worst case – assuming climate change is real?
- What is our best case – assuming climate change is not real, but energy and resource inputs are still going to go up as they get more scarce?
- Where do our opportunities lie?
- How do we insure1 ourselves against worst/best case scenarios?
- How do we capitalise on opportunities?
Once you have worked this all out as a company:
Do something about it.
1Insuring your business is not just about paying an insurance company. It is about changing your processes, products and services to maximise income, minimise expenses and increase your businesses resilience to changing circumstances.
