Resilience of SMEs against extreme weather

Bingunath Ingirige, Keith Jones, Gayan Wedawatta and Fuad Ali

CREW Final Conference, RICS, London25th November 2011

Making climate change real – lessons from SME’s

Background Theory

HouseholdsPolicy Makers

CommunityResilience

SME’s

Stake-holder

Vulnerability

ResilienceAdaptive Capacity

What do vulnerability, resilience and adaptive capacity mean to SME’s?

What affects a SMEs response to extreme weather events?

What can be done to better prepare SMEs?

Field study with SMEsQuestionnaire survey involving 140 SMEs

Conducted with the assistance of Federation of Small Businesses (FSB) Located in Greater London Top management of the SMEs as survey participants

Interviews with 12 SMEs Mainly focused on flood risk Majority were micro businesses (less than 10 employees) 4 had previously experienced a flooding event

Transport, Storage and Communica-

tion; 21%

Real Estate, Renting and Business Activities;

21%

Construction, 15%

Wholesale and Retail ; 14%

Education; 7%

Manufacturing; 5%

Other; 16%

Micro 84%

Small 13%

Medium4%

Past ExperienceSixty percent of respondents had experienced EWEs (2005 – 2009)Of these, 84% had experienced business disruption

Very few of these had implemented coping measuresProperty level coping mechanisms Other strategies for business continuity

Premises improvements 19% Business data backup system 23%Stock / equipment relocation 7% Business continuity plan 17%Flood defenses 3% Reviewing property insurance for EWEs 14%Relocation of business premises 1% Business interruption insurance 9%

Planning for supply chain disruptions 6%

Employe

e absen

ce

Loss

of sale

s/pro

duction

Lower

turnove

r

Disruptions t

o acces

s

Loss

of pro

ductivit

y

Damag

e to pro

perty

Supply

chain

issues

No effect

on the b

usiness

Higher

costs

Damag

e to st

ock/eq

uipment

Health

impact

sOther

0%10%20%30%40%50%60%

Perceptions of riskMany believed that EWEs did not pose a significant business risk

This belief was higher amongst those who had experienced an event

And that it is too costly and complicated to prepare for

They mainly relied on insurance to recover if an EWE affected them

Twelve percent did not expect assistance from anyone

Not Sign

ificant

No Future

Impact

Currently

Evalu

ating O

ptions

Too Costl

y

Too M

uch W

ork

Lack o

f Inform

ation

Too Complica

tedOther

0%

10%

20%

30%

40%

50%

60%

Total Sample Previously Affected

Insuran

ce co

mpany

Local

authorit

y

Emerg

ency

servic

es

Local

utility co

mpanies

Centra

l gove

rnmen

t

Trade a

ssocia

tion or other

business

network

Neighbour b

usiness

es

Envir

onment a

gency

Supply

chain

mem

bers / c

ustomers

0

20

40

60

80

Event

Heavy rainfall

(Flash) Flooding of w

orkshop/outlet

Consequences to the Business

6 Months without business

Damage to business premises

Damage to stock

Loss of customer base

Loss of trading/income

Cleaning and dehydration costs

Repair and restoration costs

Impact

Case studies of SMEs – SME4Affected by flooding, still no resilience measures except insurance

Stock relocation costs

Difficulties involved with assessing and claiming

insurance

Event

Heavy rainfall

(Flash) Flooding of w

orkshop/outlet

Consequences to the Business

3 Months without business

Damage to business premises

Damage to stocks and equipment

Loss of paperwork

Delay in supplying orders

Loss of trading/income

Repair costs

Increased Insurance premium

Loss of records

Complete damage not met by insurance

Impact

Case studies of SMEs – SME3Affected by flooding, implemented resilience measures

Case studies of SMEs – SME3Affected by flooding, implemented resilience measures

Event

Heavy rainfall

(Flash) Flooding of w

orkshop/outlet

Consequences to the Business

3 Months without business

Damage to business premises

Damage to stocks and equipment

Loss of paperwork

Delay in supplying orders

Loss of trading/income

Repair costs

Increased Insurance premium

Loss of records

Complete damage not met by insurance

ImpactResilience measures

Raised storage

Online data backup system

Event

Heavy rainfall

(Flash) Flooding of w

orkshop/outlet

Consequences to the Business

3 Months without business

Damage to internal premises

Delay in supplying orders

Loss of trading/income

Repair costs

Increased Insurance premium

ImpactResilience measures

Online data backup system

Flood barrier

Case studies of SMEs – SME3Affected by flooding, implemented resilience measures

Raised storage Damage to stocks and equipment

Loss of paperwork Loss of records

Complete damage not met by insurance

Challenge: Make the risks realLanguage is critical

Business find it difficult to recognise and interpret climate change stimuli and as such assess their vulnerability to future events.

Business Continuity Planning is weak Don’t see the need for any additional preparation.

Personal attitudes are significant Organisation’s find it difficult to assess the advantages and disadvantages of

alternate adaptation strategies, which invariably have up-front costs associated with them.

How much should you spend (time & money) preparing for an event that hasn’t happened and may might not happen?

Adaptation is business centric not climate centric Need to phrase adaptation in terms of business risk

Risk Assessment FrameworkThe risk assessment framework has been developed through a series of projects with private and public sector organisations to assist businesses assess their vulnerability, resilience and adaptive capacity to climate change.

Then example is drawn from a social housing provider.

Current Conditions

Current Conditions

Examine recent history and identify disruption caused by

extreme weather events

Analyse each event and identify inherent vulnerabilities and

resilience of the system (social, physical, economic, legislative).

Future Scenarios

Future Scenarios

Develop future scenarios, based on climate change predictions, that cover the range of possible

impacts of future events

Assess vulnerability and resilience of existing systems against each

scenario(social, physical, economic and legislative)

Risk Appraisal

Rate each system component according to impact (matrix of

vulnerability against coping capacity

For high impact components identify what can be done to

prevent disruption or improve the recovery process of the system

Cost each measure (£, human resources, skills etc)

Risk Appraisal

Contingency Planning

Contingency Planning

Assess the ability of the system stakeholder to fund/manage the

coping measure (quantify the absorptive/adaptive capacity)

Prioritise coping measures to optimise absorptive capacity

Develop adaptation plans

Integrate into building life cycleClimate Change

CSRLegislation

Time

Val

ue/P

erfo

rma

nce

Inception Handover

Maintenance / Repair

Refurbishment Cycle

Changing Demands

Obsolescence Gap

Refurbishment

Current Performance

Social – Wellbeing (physical, psychological)Environmental – Energy, Water, Pollution; WasteEconomic – Cost in Use, WLC, Productivity, Asset Value

TSB project to integrate the risk framework into an adaptation strategy within the building life cycle.

Thank You - Questions

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