In 2021 I performed strategic research on Weather and Climate impact on organizations with asset intense operations using predictions on weather and climate to estimate operational risks
Objective
The design objective of this research was to perform research across environmental, climate, and sustainability topics across executing and operational roles to identify risks in operations.
- The expected outcome was to
- Identify a short list of operational high-impact climate risks.
- Identify primary industries with operational high-impact climate risks.
- Operational success factors, product needs, and value proposition.
- Synthesize research outcomes into strategies for sustainability strategies.
The hypothesis is that shorter term extreme weather and longer term climate change have a major effect on Operations. Organizations are using predictions on weather and climate scenarios to estimate short and longer term operational risks.
Industries
Interviews were performed across a broad view of industries
Insurance
Insurance companies are highly impacted by extreme weather conditions increased by climate change.
- Cyclones, Storms, and Winds
- Hail, Flood, and Fire
- Earthquakes and Tsunamis
Insurance companies need predictions on extreme weather events to predict cash flow from Cost, Rates, Claims, Expenses, and Cash settlements with insurance customers. Products need to support weather, risk, and impact predictions, integrate with emergency authorities, and evacuation zones from wildfires, floods, cyclones, and drill into customer evacuation information.
“We need predictions on business impact quantification of weather risks, and automation capabilities that lead to an efficient claims-handling process and an enhanced end-to-end customer claims experience.”Utilities
Utility companies, like power distribution, express their need for
- 3-day to weekly weather predictions for mobilization of the crew and direct operational work planning.
- Seasonal and sub-sessional risk predictions for maintenance planning.
- Predictions on # of impacted customers or % of population
The most frequently identified risk parameters on outage and safety are Cyclones, Wind, Wind gusts, % Wind increase, and Lightning. Also causing constraints in transmission capacity. Interviews indicate that Weather is one risk area causing risks for operational incidents and emissions. We are mainly impacted by Storms, Thunderstorms, Long periods of cold, Hurricanes, and Floods. Incident reports are rolled up annually and submitted to governmental authority.
Mining
Mining companies need predictions on
- Inversion causing an increase in hazardous dust particles.
- Flooding causing damage to open mine pits and raining dams.
- Water stress in areas where the water demand exceeds the available amount.
- Heat stress in areas where the air temperature, humidity, radiation, and wind speed exceeds a wet bulb globe temperature.
Risk Analysis
Many organizations perform longer-term climate risk analysis on their business to quantify climate induced risks on corporate assets.
Climate risk assessments use the IPCC models to create predications up to 2100 using climate scenarios with, for example, a 2.5 – 3Cº global temperature increase scenario (RCP4.5) or a 5Cº increase as a result of a worse-case ‘business as usual’ scenario (RCP8.5).
The models predict Physical and Transition risks
Physical risks
- Temperature Extremes
- Coastal Flooding
- Fluvial Flooding
- Droughts
- Water stress
- Wildfire
- Tropical storms
Transition risks
- Carbon pricing
- Litigation
- Technology
- Reputation
- Market
Climate risk scenarios provide opportunities for organizations to assess risk levels for new financial investments in facilities and asset intense operations.
Conclusions
Extreme weather conditions, induced by climate change, are presenting operational risks to almost all industries.
Weather predictions are traditionally used by skilled operational staff to take preventive actions. Requirements on environmental intelligence are to move from weather predictions to quantification of short-time-frame impact to operations and longer-term risk to the asset value.
New climate solutions need to quantify the business impact of weather and climate risks across the asset lifecycle, for example:
- Operations shutdown (outage, production loss)
- Customer satisfaction (reputation, fines)
- Sustainability (incidents, emissions)
- Asset value (damage, repairs, property value)
“Extreme weather conditions occur more frequently with higher costs.” “I use weather predictions when approving production units to go off-line for maintenance.” “I only care about weather during current shifts.” “Weather conditions may damage our mine, transportation, energy infrastructure, and equipment, which in turn will disrupt operations.”