Data Analytics for Enterprise Climate Related Risks and Opportunities
There are many high-performing technology companies selling environmentally efficient products and services that operate on a global basis, employing thousands of people around the world. Frequently, the business executives leading such companies report direct positive effects on their firm’s bottom line from the investments they have made in their own sustainability as well as that of their partners, in addition to the contribution they are making to slowing global climate change. Increasingly, however, many of those same firms are being faced with unexpected natural disasters, such as flooding or powerful storms, that directly affect their operations and, ultimately, their profits.
The exposure is even greater for networks such as supply chains than it is for single location companies. The chart to the left shows how the likelihood of a disaster occurring in at least one location over a five year period increases as the number of locations grows. (Return time is the average time interval between occurrences of an event.)
To remain successful, these firms need a clear understanding of how their markets are evolving and the needs of their customers changing. At the same time, they also need to recognize that the accelerating rate of climate change is creating both threats and opportunities that they need to deal with today, as well as in the future. These threats and opportunities stem not only from the direct physical impacts of climate change, but also from the socioeconomic responses that may influence government policies, commodity prices and even consumer buying preferences.
As a result, business leaders need to understand how climate change can affect their company. More importantly, they need to identify which of the myriad of potential impacts are most significant and when they need to take action. Argos Analytics of Menlo Park, CA provides public and private sector clients with a quantitative picture of the magnitude and likelihood of the relevant physical impacts using its proprietary Trace™ system, shown in the block diagram below.
Robert Dickinson, President and co-founder of Argos Analytics says the key features of the TRACE system include:
• Analyzes the latest climate simulations to determine the likelihood of specified climatic events and conditions, such as heat waves, droughts and flooding.
• Looks at the locations and time periods of interest to a specific organization.
• Provides results based on one or more emission scenarios.
• Quick and inexpensive in comparison to traditional climate vulnerability studies.
The chart below illustrates an example of a TRACE analysis. It shows that the current likelihood, based on climate simulations, of a drought in the Sacramento and San Joaquin River watersheds per decade has increased compared to their historical frequency with a significant likelihood of longer droughts than any seen in the 20th century.
In addition, Argos can assist its clients in identifying potential climate impacts with its climate profile methodology and in assessing socioeconomic responses using scenario planning techniques.
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