Is the climate emergency a risk to your business?

One of the issues that I started to think more about when writing our climate emergency business guide was a risk: how we as business owners deal with the risks that our businesses and lifestyles face.

The climate emergency, whether we like it or not, is going to change our lives. And that includes the way we run our businesses.

How you assess these risks and determine the actions you will take to mitigate those risks will be the key to how your business survives during the next few years – and the next few decades. This is not ‘pie-in-the-sky’ thinking. This is a real emergency with real consequences, so you fail to plan for it at your peril.

Where do you start?

The key part of the process for any small business is to consider the way that the climate emergency may change the way you do things. That includes price points, profit margins, supply change, employees, logistics and, fundamentally, whether you can still follow your current practices within an environment of changing legislation and ethical standards.

Every business, whatever size, service or product or sector, needs to complete a risk assessment. This doesn’t have to be as complex or scary as it sounds and it doesn’t have to be an overly onerous process, but it does need to be done. This assessment and your regular risk register review need to become a habit, and I suggest it is built into your quarterly routines.

Once you have created the register, there need to be actionable points to help you manage risks and be prepared for events.

So I thought it would be useful to pull together a simple risk register tool and talk through the areas that you need to think about. This will give you a quick and simple way to set up your own risk register.

What is a risk?

A risk is an event that could potentially cause harm or loss, or affect the ability to achieve objectives. Risk is measured by the probability of a threat, the vulnerability of the asset to that threat, and the impact it would have if it occurred.

What are the climate risks?

What specific climate risks might you need to pick up in your risk register? These are issues that you might not have considered before, but they are increasingly likely. In fact, many experts believe they are inevitable. These include:

•         Droughts affecting access to water
•         Increased rainfall causing flooding
•         Access to key resources caused by delays in the supply chain
•         Instability in regions of the world where you might trade or have suppliers
•         Diseases, including pandemics like COVID
•         Increased heat – how we work and produce in higher temperatures
•         Low growth rates mean pensions grow slower than expected
•         Inflation leads to reduced profit margins
•         Regulation changes where trading may be restricted
•         Additional disclosure requirements such as impact reporting
•         Reputation – how will your customers view you?
•         Demand fluctuation – will your consumers still want your goods or services?
•         Taxation will taxes rise to pay for the transition or for new technologies?
•         Insurance costs – is your insurer still prepared to insure your business?

Many of these risks will destroy a business if they come to pass – and they may not even feature in your current risk register.

What is a risk register?

A risk register is a list of the risks you have identified. Each risk is rated according to its relative likelihood and impact on your business. You can then rank the risks, dealing first with the ones that pose the biggest risks to your business operations. This gives you a focus on the risks you need to deal with, allowing you to create plans to mitigate or avoid the risks. These then feed into your goals on your business plan.

The ranking and severity of the risks may change over time, which is why you need to review the register quarterly and update it when needed.

How do you build a risk register?

Essentially, you review ten different areas within the business:

•         Governance
•         Leadership
•         Product/services
•         Operational
•         Marketing
•         Sales
•         Finance
•         HR
•         Admin
•         Technology

Work with your team to identify the risks in each area. By talking this through in your business, you may uncover potential risks that you wouldn’t have thought of, and this is an important part of the process.

As you can see, risks associated with the climate emergency could fit into all of the above areas. But if it makes it easier for you to get started, you can add ‘Climate’ as an 11th area to consider.

If you’d like a copy of our Excel-based Risk Register Template, please drop us a line. The tool automatically calculates the overall risk for each item based on your assessment and comes with simple instructions.

Please note: This is not meant to constitute professional advice. It is generic guidance only and things may have changed since it was written –please always seek specific & tailored advice for your circumstances.