Future Ready

8Reporting Risk and Assessing Vulnerability

Regardless of sector or type, organizations have always faced some degree of risk from the natural world—earthquakes, volcanoes, hurricanes, ice storms. But over the past 5–10 years, the different types of risk related to climate change have become more widely recognized as serious threats to companies' assets, revenues, employees, competitiveness, and even viability. These categories of risks can be thought of and weighed against each other just as governments at all levels and some companies did during the COVID pandemic. First, organizations implemented and maintained ongoing assessments, including new waves of infections, hospitalization rates, and deaths. Organizations then used this data to inform a massive and delicate balancing act. On one hand, protective measures like wearing masks, getting vaccinated, and staying home could prevent large numbers of people becoming sick. However, when large numbers of people are home, many companies have to suspend at least some operations, which has a negative financial impact on the company, its employees, and society as a whole.

In the case of climate risk, there are two main categories, physical and transition, each of which impacts organizations in different ways and with various degrees of severity. Physical risk includes chronic, ongoing issues like temperature changes and sea level rise as well as acute events like heatwaves, hurricanes, wildfires, or floods that may occur with greater ...