Climate change is a risk concern for corporations

global warming, rising temperatures, climate change

Risk managers have discovered that the climate change discussions remain elitist conversations.

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I recently had a chat with an influential figure in Kenya's business landscape and as we discussed risk management, he asked me: should climate change concern risk management experts in today’s organisations? I responded in the affirmative and here is why.

The reason why the world at large is worried about climate change is based on the risks that come with it. Whereas risk as the combination of the probability of an occurrence and its impact, climate change refers to long-term shifts in temperatures and weather patterns as a result of human activities.

These shifts result in risk events such as prolonged droughts, flooding, heatwaves and cyclones. Human activities have over time contributed to events whose consequences have been grave to humanity, and to deal with climate change, risk management is critical.

This means that we need to recognise the hazards and subsequently the risks that we have created, the associated risk events, their impact on our planet and start putting in place risk mitigations that are well designed and operating effectively.

The World Economic Forum's Annual Global Risk (WEFAGR) report has for the last several years consistently ranked climate issues as the top risks that corporates, countries and the world needs to address.

The 2024 report released on January 10, 2024 enumerates the top 5 risks over a 10-year period as extreme weather events, climate change to earth systems, biodiversity loss and ecosystem collapse, natural resource shortages and misinformation and disinformation. Usually, these matters sound far-fetched until a climate risk event comes knocking on our doors.

The Intergovernmental Panel on Climate Change estimates that global warming of 1.5 to 2 degrees Celsius above pre-industrial levels will be exceeded unless there are deep reductions in carbon dioxide and other GHG emissions. It also states that the average temperature on the planet now is already 1.1 degrees Celsius above pre-industrial levels, halfway to the boundary that we must not surpass.

The apparent climate change risks notwithstanding, risk managers have discovered that the climate change discussions remain elitist conversations and something needs to be done for the masses to understand that this is a matter that concerns us all.

Most of us have heard that greenhouse gas emissions over time dating back to the start of industrialisation have resulted in the greenhouse effect where heat is trapped on the earth. This heat in turn causes warming and the warming causes climate change which then results in the climate risks and consequences explained earlier.

When greenhouse gases are emitted in any part of the world, they don't stay there. This means that greenhouses emitted in North America don't stay in North America. The air in the atmosphere all around the world mixes homogeneously and this process takes about 30 days.

So, every 30 days, air across the world mixes homogeneously and as more greenhouse gases are released into the atmosphere, mixing of air continues across the world and the warming effect becomes a global phenomenon affecting us all.

This means that failure to mitigate climate change is the biggest risk of our time because if we don't deal with that, it will be futile to manage any other risk a few years down the road.

Corporates need to think about this not only from a policy and regulatory standpoint, but also fundamentally from an ethical perspective.

Risk managers need to understand the consequences climate change introduces if they are to be sound advisors of the businesses and corporates they support. The time for this new approach is now.

- Audrey Kemuma a Risk & Resilience professional, is the Head of Risk Management, Quality and Compliance at the Nairobi Hospital. She can be reached on [email protected]