Summary

The agency is a government department charged with supporting, developing and enhancing the agriculture sector, including supporting agricultural exports and international market access. It is also responsible for regulating biosecurity, food safety, animal welfare, licensing and compliance as well as coordinating planning for, responding to and recovering from disasters, including natural disasters and biosecurity incidents. The agency wanted to identify threats and opportunities associated with climate change to help it develop strategic and business plans.

A qualitative risk assessment was undertaken in two stages. On the first pass, risk priorities were assigned based directly on the impact and likelihood ratings assigned by the participants. In the second pass, the participants reviewed and adjusted the initial priorities to reflect their agreed view of the agency’s risk outlook.

Climate change involves significant uncertainty in the risk management context as well as in the emergence of risk. An iterative approach to risk assessment, described here, is important when there is high uncertainty in the climate scenarios. Some risks can be addressed using information that is available currently, but others require more detailed information and analysis, sometimes including quantitative risk analysis, to support useful decisions.

Background

The agriculture agency

The agency is a government department with roles of:

• Supporting, developing and enhancing the agriculture sector, including fisheries and forestry, and promoting the interests of stakeholders
• Supporting agricultural exports and international market access
• Regulating biosecurity, food safety, animal welfare, licensing and compliance
• Coordinating the work of planning for, responding to and recovering from disasters, including natural disasters and biosecurity incidents.

Climate change is a pervasive and complex issue. Its effects were being felt across the sector, with impacts on many of the agency’s objectives.

Purpose of the risk assessment

The agency wanted to identify threats and opportunities associated with climate change more explicitly, to help it develop strategic and business plans to support its future activities.

The case study

This case study outlines the conduct of the risk assessment and its conclusions.

This case did not address measures intended to mitigate climate change itself, such as reducing greenhouse gas emissions. While these were extremely important, they would usually be considered in a strategic regional, national and international context. However, the agency planned to consider risk-based mitigation strategies in a separate analysis.

Approach

The approach described here was designed to provide a basis for continuing to review and respond to risks arising from climate change. In recognition of other demands on the agency’s personnel, this exercise was designed to make efficient use of their time. It was based on extensive experience of facilitated risk assessment processes implemented in a wide range of settings using ISO 31000 Risk management – Guidelines. It followed the approach suggested in Climate Change Impacts and Risk Management: A Guide for Business and Government.

This workshop was seen as the start of a larger continuing process. As climate science advances and our understanding of the potential impacts of climate change increases, our view of the risks flowing from climate change will evolve. Continuing attention to the subject will allow the agency to develop a cohesive strategy for dealing with the effects of climate change on primary industry.

The process used for the risk assessment was based on ISO 31000 (Figure 1). It was adapted for this case by including explicit climate change scenarios, provided by a scientific research organisation, as part of the initial ‘scope, context and criteria’ step.

Framework and context

Framework for thinking about climate change risks

The ‘scope, context and criteria’ step of the risk management process in Figure 1 was used to set up a framework for identifying and assessing risks associated with the impacts of climate change. It was developed in a flexible way so it could be applied at several levels, including:

• Across the agency as a whole
• For one or more of its functional divisions
• For a specific region within the agency’s jurisdiction.

The framework was intended to provide a clear foundation and a common understanding of the scope of the assessment, how risks were to be rated and how the analysis was to be approached. The framework was consistent with the one being used in the agency for other forms of risk assessment. Its main parts are outlined in Table 1.

Scope

The workshop was open to any matter of concern to the agency that might be affected by climate change. It focused on a 25-year period into the future. Climate change scenarios had been developed for that period, across the agency’s geographical jurisdiction.

Stakeholders

A detailed stakeholder analysis was not needed for this assessment, but some of the groups who formed part of this analysis are listed in Table 2. (This was not intended to be an exhaustive list, and anyone deemed to be a stakeholder could be considered in the assessment.)

Criteria and scales

The measure of the impacts of a risk in this case was the extent to which the risk affects the success of the agency. High level criteria for encapsulating the long term success of the agency were developed from its Strategic Plan and its existing risk management framework (Table 3).

To enable the participants in an assessment workshop to set priorities and agree consequence ratings, five-point scales were developed for each criterion in Table 3. For each criterion and scale point, a paragraph of text outlined what impacts might arise at that scale point. These descriptions were the focus of significant discussion in the agency during the development of the framework, to ensure they aligned with the agency’s objectives and reflected its risk appetite.

Initial likelihood ratings were based on a particular level of impact arising, within a specific climate scenario. Where necessary, the outcomes were later adjusted to reflect the fact that some climate scenarios were more likely than others.

Initial priority ratings were assigned based on the impact and likelihood ratings chosen for a risk.

Key elements

A set of key elements was used to structure and set the agenda for the risk assessment process (Table 4).

The key elements were not intended to restrict the exercise, nor were they necessarily risk categories. Any risk that was raised was considered. The key elements were simply a prompt and tool for managing time in the workshop efficiently. (After a workshop, it is often useful to arrange risks into groups for presentation, analysis and planning purposes. These groups might not reflect the key elements used to elicit them.)

Climate change scenarios

Climate change scenarios define how climate is assumed to change in the future. They provide the basis for analysing the impacts of risks and their likelihoods.

Many government organisations and agencies provide general scenarios that describe how the climate might change in future across broad regions. These often provide an excellent starting point for developing specific scenarios for risk assessments, but they may need to be adjusted to take account of:

• The conditions expected in a particular, smaller region
• The sensitivity of the industry or activity being addressed to specific changes that are not described well in a general scenario.

In this case we developed two scenarios for potential use by the agency. Both projected plausible changes that might arise over the 25-year scope of the assessment. In practice, the agency decided to use only the more likely scenario, with the effects of the other scenario considered on an exception basis where it seemed there might be significantly different implications.

The more likely ‘hot and dry’ scenario was presented in two forms:

• A table showing the direction of change in relevant climate variables (like Table 5), with indicative estimates of the magnitude or frequency of changes provided where feasible
• A ‘word picture’ outlining the conditions that would prevail in the scenario and examples of their impacts.

The workshop introduction noted that changes indicated in the scenario would not necessary occur smoothly over time, with recent evidence indicating that changes to some climate variables, notably annual average and seasonal average rainfall, might be abrupt.

Risk assessment

Process

We facilitated a risk assessment workshop with members of the agency whose collective experience covered all the elements in Table 4.

We used brainstorming to identify risks associated with each element, and then:

• Noted any existing controls that might affect the impacts if it were to occur or the likelihood of that level of impact being felt
• Taking account of those controls, assigned each risk an impact score and a score for the likelihood of that level of impact arising
• Assigned an initial priority, based on the impact and likelihood scores.

When all key elements had been considered the risks were reviewed to confirm the levels of priority that had been assigned. Where necessary, priority scores were adjusted to reflect the agreed view of the workshop participants.

Outcomes

Fifty one risks were identified initially. Eleven of these were later set aside as being too detailed for the level at which the workshop was aimed or because they were topics of interest that might be better considered in a different forum.

The initial analysis placed more than half the identified risks in the highest priority category. This reflected the preliminary belief among participants that the risks they raised were already starting to affect the agency, so there was little doubt about the likelihood of them happening, and that many of the foreseeable impacts were very severe.

In the review at the end of the workshop, many of the initial priorities were reduced. The initial priorities were determined directly from the impact and likelihood ratings. This is good first cut at an agreed rating but there are often peripheral issues that affect the rating. Rather than invest a lot of effort in making the rating scales more sophisticated and complicated, it is more efficient to use a straightforward scale as a first pass and refine that in a later review. The pattern of adjustments is shown in Table 6.

Fifteen risks initially rated Extreme were reduced to High and three were reduced to Medium. Similarly, most risks initially rated High were reduced to Medium. No risks were elevated above their initial priority, reflecting a consensus that the initial assessment had overstated the priority of many risks when viewed in the context of the agency’s total responsibilities. The revised priorities were felt to reflect the participants’ overall view of the climate related risks facing the agency.

Next steps

The outcomes from the risk assessment were to be addressed in the next steps of the risk management process. In particular, shortly after the workshop, a review and revision of the agency’s Strategic Plan started. As a first step, responsibility was allocated for the six Extreme risks, which were:

1. Increased competition for water for irrigation and horticulture leads to reduced economic activity, increased social division and reduced environmental sustainability
2. Reduced water availability for irrigation and horticulture leads to lower production volumes
3. Insufficient water to sustain existing dairy operations, leading to reduced employment associated with industry consolidation and reduced production
4. Changes in habitats, breeding patterns and distributions of fish and marine invertebrates lead to fisheries harvest strategies becoming unsustainable
5. Regulations and public opinion reduce the economic viability of hydrocarbon extraction industries, particularly for coal and gas, with adverse flow on effects on revenue, jobs and regional communities
6. Increasing rate and extent of natural disasters leads to increasing demands for assistance and recovery activities that current resources and emergency funding are not able to meet.

Several of the extreme and high risks were inherently complex. Participants recognised that they would have to tease out the factors at work in each of the risks, including specific climate drivers, and their effects on agricultural industry activity and associated industries and communities. Responsibilities were allocated for investigating the causes and impacts of selected extreme and high risks, as preparation for developing proposals for concrete treatment actions.

The agency realised that the complexity of the issues, allied with the fact that awareness of the risks was growing at the same time as the risks themselves were developing, would require serious attention to the communication and consultation aspects of the risk management process if it was to be effective. Responsibility for addressing communications about climate risk was allocated soon after the workshop.

Lessons

Priority adjustments

Initial assessment priorities are a guide. The scales and the way in which impact and likelihood scores are combined are there to provide a quick way of focussing attention on things that might be important, not to provide a formal quantitative measure of the level of risk. In this case, the workshop participants were conservative in their initial judgements, which meant that nothing important was omitted, but they recognised that those judgements should be adjusted to maximise their value for making decisions.

The evaluation step in the risk management process is intended to achieve this reconciliation, between the initial outcome of the analysis and the wider context of the organisation, recognising that it is not cost-effective and may indeed be difficult to achieve a perfect ranking on the first pass. However, priority rankings resulting from an initial analysis, followed by an evaluation review, are usually quite stable, at least within the group that produced them.

Pattern of priorities

Not only were many risks rated Extreme and High, even after adjustments, but it is noticeable that more than half of them were described as already happening and so given a likelihood rating of ‘almost certain’. Several more were rated as ‘likely as not’ to arise.

This is a pattern we have observed in other analyses of climate change risk where issues that have been building up are formally tabled for the first time. The implementation of effective risk treatments should see this risk profile change.

Another reason for the large number of risks rated as likely to arise is that the participants in the workshop might have little confidence that their organisation has grasped the severity of what they see at the operational level. This is a common feature of risk assessments across a wide range of applications. It may be a sign that the Board might wish to devote more effort to communicating the rationale for existing priorities to their staff and possibly reviewing those priorities.

Iterative risk assessment for climate change

The risk management process in Figure 1 is implicitly iterative, with many feedback loops and cycles. However, because climate change involves significant uncertainty in the risk management context as well as in the emergence of risks, very often the outcomes of the risk evaluation step lead to more explicit iterations. The diagram in Figure 2 shows a common form of triage when evaluating a risk.

The three evaluation outcomes are:

1. The risk is important and action should be initiated soon
2. The risk is not important and nothing more is needed for now
3. The risk may be important, but there is significant uncertainty that indicates more analysis is needed to determine whether action is required, or what form of action it should take.

This explicit form of iteration is particularly important when there is high uncertainty in the climate scenarios. Some risks can be addressed using information that is available currently, but others require more detailed information and analysis, sometimes including quantitative risk analysis, to support useful decisions.

References

Australian Government (2006) Climate Change Impacts and Risk Management: A Guide for Business and Government. Australian Greenhouse Office, Australia. (Available here.)

CSIRO (2018) Climate Compass: A climate risk management framework for Commonwealth agencies. CSIRO, Australia. (Available here.)

International Organization for Standardization (2018) ISO 31000 Risk management – Guidelines. ISO, Geneva.