Week 10 - Physical and Transition Risk Flashcards

1
Q

What are Physical Risks?

A

Threats and opportunities related to changing weather pattern. E.g., in NZ’s agricultural sector.

  • Increasing frequency of drought
  • Water availability
  • Increaseintemperatures/risingsea level
  • Extreme weather events (cyclones/hail/flooding)
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2
Q

What are Transition Risks?

A

Challenges and opportunities related to regulation and market changes.E.g., in NZ’s agricultural sector.

  • Changes in purchasing behaviour
  • Customer expectations and requirements
  • Govt regulation and policy (inc. market access)
  • Technology changes
  • New financing criteria and products
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3
Q

Climate Scenarios - Disorderly (Met, Disorderly) based on whether Paris Agreement 2050 emission reduction target are met.

A

Sudden and unanticipated response is disruptive but sufficient enough to meet climate goals.

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4
Q

Climate Scenarios - Too little too late (Not Met, Disorderly) based on whether Paris Agreement 2050 emission reduction target are met.

A

We don’t do enough to meet climate goals, the presence of physical risks spurs a disorderly transition.

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5
Q

Climate Scenarios - Orderly (Met, Orderly) based on whether Paris Agreement 2050 emission reduction target are met.

A

We start reducing emissions now in a measured way to meet climate goals.

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6
Q

Climate Scenarios - Hothouse World (Not Met, Orderly) based on whether Paris Agreement 2050 emission reduction target are met.

A

We continue to increase emissions doing very little, if anything, to avert the physical risks.

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7
Q

Example of a risk workshop

A
  • Identify risks (threats and opportunities) for the business
  • Evaluate the risk
  • Identify and evaluate controls
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8
Q

Describe the Risk Assessment

A

Once you’ve identified a risk, please assess the
* Consequence of the threat/opportunity on the business
- Rate this between 0-5
- 5 means major impact (positive or negative)

  • Likelihood of this impact occurring
  • Rate the between 0-5
  • 5 means high likelihood of occurring
  • Confidence
  • How certain are you of the consequence/likelihood rating you’ve provided?
  • Low (1), Moderate (2), High (3)
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9
Q

Risk Controls

A
  • Are there ways to mitigate threats or leverage opportunities?
  • How would this change the consequence and likelihood
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10
Q

Timeframes

(this card needs more context)

A
  • We are going to start by identifying and evaluating g risk in the next few years
  • Then, to consider long term risks, we will use scenarios
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11
Q

Social Impacts of Hot-house

A
  • There is huge global demand for food as population grows and agriculture land is affected by climate change.
  • No increased demand for sustainable food
  • Challenge is attracting employees to the agriculture sector due to physical impacts of climate change
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12
Q

Environmental Impacts of Hot-House

A
  • Steadily increasing severe acute and chronic weather events. Global warming 2.4°C and increasing.
  • Either too much or too little water, leading to variable production and quality. Community tension over lack of water
    control/who should have priority.
  • Soil is eroded and extreme weather causes significant damage. Uncurbed urban expansion has used a large amount of
    productive land.
  • Competition for land area from urban expansion and alternative crops (e.g., soybean, kumara)
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13
Q

Technology Impacts of Hot-House

A
  • Lack of sustainable technology advancements
  • Delayed realisation of the potential of GMO
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14
Q

Policy Impacts of Hot-House

A
  • Lack of policy for agriculture leading to lack of support systems.
  • There are challenges accessing capital due to the extent of physical impacts of climate change.
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15
Q

Markets Impacts of Hot-House

A
  • Some premium sustainable products maintain NZ premium image but others lose it as
    environmental issues are deprioritised
  • There is unpredictability around the ability to export goods.
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16
Q

Hot-House: Orchards lose productivity because of a lack of access to water:

A

Orchardists/organisations face increased maintenance
and rebuild costs, insurance and tax costs

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17
Q

Hot-House: There is a loss of productive land due to the physical impacts of climate change

A

Pest incursions and biosecurity issues become more common, damaging crops and afflicting orchards

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18
Q

Hot-House: Food security is threatened for New Zealand. Tensions rise as export prices are more favourable than supplying the domestic market

A

Insurance/capital is available but the physical impacts of climate change make some regions uninsurable and
too risky for finance

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19
Q

Hot-House: The wider agricultural sector shrinks as it struggles to maintain supply

A

Physical impacts of climate change devastate communities and certain industries, causing loss of community wellbeing/livelihoods

20
Q

Hot-House: Increased displacement of people domestically and internationally

A

Increasing global commodity prices

21
Q

Hot-House Physical Changes (2030-2050)

A
  • Average air temperature between 0.7-0.9 degree Celsius.
  • Daily temperature is expected to increase faster than overnight temperature
  • 15-20 more days/year with temperatures above >25degree Celsius.
  • Increased fire risk and days with very high and extreme fire danger index
  • 5-8 more dry days/year. Time spent in drought increases 5-20%
  • Extreme wind speed increases 10%. Frequency of extreme wind increases in winter, decreases in summer
  • Increases in rainfall and cyclone intensity
  • Decrease of 2-3 frost days
  • Sea level increases 30-40cm
22
Q

What is the Risk Process?

A
  1. Planning
  2. Risk Assessment
    a. Identification
    b. Analysis
    c. Evaluation
  3. Risk Treatment
23
Q

Establish the context

A

Think about what and why you are doing it, who is involved and the scope, consequences.

24
Q

What is the objectives

A

e.g. recommit risk- reducing measures

24
Q

What are the limitations

A

e.g. resources, data/information, time

25
Q

Clarify what you are measuring

A

What are the limits of your analysis?
* The consequences
* The timeframe
* The boundary

26
Q

How will the analysis be used in decision-making?

A

E.g.,
* Changes in risk
* Cost-effectiveness
* Cost-benefit analysis
* Risk acceptance
* As low as reasonably practicable (ALARP)

27
Q

Selection of analysis method - Simplified/crude risk
analysis. Type? Description?

A

Qualitative - Informal procedure that
establishes risk picture
using brainstorming
sessions and group
discussions

28
Q

Selection of analysis method - Standard risk analysis. Type? Description?

A

Qualitative or quantitative - Formalised procedure using
methods such as coarse
risk analysis etc.

29
Q

Selection of analysis method - Model-based risk analysis. Type? Description?

A

Quantitative (with
qualitative evaluation of
data/information) - Model-based analysis using techniques such as event trees, fault trees, Monte
Carlo etc.

30
Q

Selection of analysis method - Forward Approach

A

identify initiating events, think about consequences of those events

31
Q

Selection of analysis method - Backward Approach

A

identify consequences that we wish to avoid that aren’t important

32
Q

Risk (Bow-tie)

A

Remember in notes! (Slide 33, 34)

33
Q

Identification

A

Identify the “initiating events”
“What you have not identified, you can’t deal with”
This must be creative so to identify “unusual events”
Diversity of perspectives is essential (e.g. to avoid black swans)

34
Q

Identification: To avoid surprises

A
  • Provide an overview of the assumptions made
  • Assess the risk from deviations to those assumptions (sensitivity)
  • Try to reduce the assumptions that have the largest impact on the risk
35
Q

Identification: Techniques

A

Failure modes and Effects Analysis (FMEA)
* Systematically consider each component in a system. What happens if it fails?
Hazard and Operability study (HAZOP)
* Qualitative technique to consider scenarios causing a deviation in a system’s
processes: “no/not”, “more of/less of”, “as well as”, “part of” etc.
* E.g., “No throughput” in a pipe from one unit to another
Structured What-If Technique (SWIFT)
* Consider each element, ask “what if…”

36
Q

Cause analysis

A

What are the factors that cause the initiating events to occur?

37
Q

Cause analysis: Techniques

A
  • Brainstorming sessions
  • Fault trees
  • Bayesian networks
38
Q

What is Fault Tree Analysis

A

Boolean symbols in a fault
tree.
- And Gate (Semicircle Arrow)
- Or Gate (Round Arrow)
- Description of event state (Rectangular)
- Basic event (Circle)
- Transfer symbols (Triangle)

  • Fault tree in parallel and series! (Notes Slide 41)
39
Q

What is Bayesian Network

A

A series of nodes and connections
indicating causal relationships.
E.g., a tree may lose its leaves due to
disease or lack of water.
The probability of a loss of leaves can
be calculated using Bayes formula if
we know the probability of drought or disease.

40
Q

What is Monte Carlo Simulation

A

A computer simulation that enables
multiple probabilities and
relationships to be empirically
assessed.
For example, simulate the probability
that the tank overfills

41
Q

What is Consequence Analysis

A

What are the possible consequences?

42
Q

Consequence analysis: Techniques

A

Event tree analysis
Physical modelling
E.g., computational fluid dynamics models for fire spread

43
Q

Do we consider the time component of risk?

A

Yes

44
Q

Consequences can be qualitative

A

Often there is qualitative information that needs to be considered in order to reflect impact/consequence.

45
Q

Cascading Impact Diagrams

A

A type of ‘systems map’
Show the complex inter-relationships between the effects of climate change hazards and stressors on the things we value (value elements)