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Future-proofing your climate resilience response

For firms globally, the pressure to improve their environmental, social, and governance (ESG) impact is increasing. A robust ESG programme has the potential to reduce and mitigate risks across various principle risks – most notably operational risk.
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By David Tate , 

Retail, Food, Beverage and Leisure Industry Leader, UK & Ireland

06/06/2022 · 3 minute read

For firms globally, the pressure to improve their environmental, social, and governance (ESG) impact is increasing. Investors and consumers are now basing investments and financial decisions on a positive ESG rating. During COP26, over 140 countries and many companies focused heavily on the ‘E’ part of ESG, announcing Net Zero and Carbon Neutral pledges; however, many companies have yet to adequately respond to the ‘S’ and ‘G’ aspects of ESG. 

A robust ESG programme has the potential to reduce and mitigate risks across various principle risks – most notably operational risk. Through good governance, enhanced social initiatives, and responding to near-term (as well as, longer-term) environmental and climate risks, firms can boost their ESG ratings and enhance operational resilience. 

Your resilience strategy is critical

A combination of a global pandemic and more localised supply chain disruptions, such as Brexit, has demonstrated the vulnerabilities within supply chains, and the need to better prepare, assess, and incorporate more resilience to mitigate new risks.

An end-to-end approach can help organisations build resilience through the following phases:

  • Profile: Review and prioritise physical and operational risks for sites and assets, as these can be a key driver of insurance premiums, deductibles, and terms and conditions. 
  • Assess: Explore asset and site resilience assessments and develop action plans to identify areas in need of further risk mitigation. Ongoing and regular asset, site, and thematic resilience assessments can identify horizon risks and resilience gaps. 
  • Implement: Act on surveys and action plans, to provide an emergency response plan for hazards identified, and develop resilience measures (including flood defences and mass-event messaging systems). This also enables insurers to better understand exposures and maturity of risk management accordingly.
  • Risk Transfer: While recognising risk and resilience improvements, seek to address the residual risk. Discussing both aspects with Insurers ensures they have a holistic view of the risk and provide appropriate pricing, deductibles, and terms and conditions when considering existing resilience measures.
  • Monitor: Provision site leads and risk managers with early warning monitoring tools to reduce lead-time to enact emergency response plans for known physical and operational risks (such as flood warnings, real-time crime, and behavioural trend alerts). 

Enhanced Monitoring can reduce the impact of Physical and Operational Risks

The resilience strategies of most organisations only focus on retrospective monitoring. While this can provide effective post-event reporting and operational improvement of future resilience assessments, retrospective monitoring does not reduce the impact of the risk when it occurs. 

The effectiveness of resilience programmes and plans increases with more advanced warning of the hazard occurring. Using early warning and hazard monitoring tools provides your organisation with time to communicate to staff and implement emergency response plans, resulting in reduced losses arising from climate-vulnerable assets, as well as the safeguarding of employees and customers (for instance, deploying flood risk mitigation to immobile food manufacturing equipment, moving perishables to local resilience locations, relocating staff, and keeping customers safe). In addition, provisioning of early-warning monitoring tools can reduce your ESG risk exposure: 

  • Environmental — mitigate asset, site, and operational losses arising from natural catastrophes. 
  • Social — advanced implementation of emergency plans to protect staff and customers.
  • Governance — enhancing resilience governance through robust advanced monitoring of near and long-term physical and operational risks.

Many organisations are taking action to incorporate forward-looking adaptations into their operations and business, increasing their resilience to quickly bounce back from events causing business interruption. Ensuring that resilience strategies are end-to-end is imperative to future-proofing your organisation’s resilience — particularly as risk will become more frequent, complex, and unpredictable.

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