[Skip to Content]

Framework Step 2: Assess

What is the Likelihood and Consequence of Climate Change Threats?

Elements of Risk

Understand the Elements of Risk and the Link to Climate Change
Risk Prioritization Matrix
Once you determine the likelihood of a threat and its potential consequences, you can map the threat onto this figure as a method of prioritizing risks.PrioritizationMatrixSource: Adapted from Australian Industry Group

Risk is traditionally a function of two elements:

  1. The likelihood of a threat occurring, and
  2. The consequence of the resulting event.

Climate change may affect both elements of risk. It may increase the likelihood of disruptive weather events by increasing their frequency. For example, flooding events that once occurred approximately every 100 years may begin to occur every 50 or 20 years in some locations. Likewise, climate change may affect the consequence of weather-related disruptions to the supply chain by increasing the severity of weather events. For example, Atlantic hurricanes have already increased in intensity, frequency, and duration since the early 1980’s and this trend may continue as sea surface temperatures continue to rise.

The goal of assessing risk is to help agencies identify priority risks based on qualitative ratings of each threat’s likelihood and consequence. To help with the priority risk identification, agencies can use a “risk map” similar to that in the figure to the right to visually see how the intersection of likelihood and consequence indicates the level of risk and the priority for management

Likelihood of Climate Change Threats

Assess the Likelihood of Climate Change Threats

To assess the likelihood of climate change impacting a specific supply chain, use climate change information gathered within the “Identify Key Climate Threats” section to determine the degree to which the supply chain may be exposed to climate change threats. Core questions to answer about the likelihood of future impacts include:

  • Over the past few decades, how often has this type of weather event occurred and impacted your agency’s supply chain (at any magnitude of impact)?
  • How is the frequency of this weather event projected to change in the regions in which the supply chain operates?
  • How rapidly are changes in the frequency of these climate change threats projected to occur?
  • Does this represent a low, moderate, or high increase in the frequency of events as compared to today?

A helpful way to begin to determine the frequency of climate change threats is to identify historical frequency of events. Possible resources for this information include state climatology offices, the U.S. Climate Resilience Toolkit, and other resources mentioned in the “Identify Key Climate Threats” section. However, this information can be difficult to sort through and there is a significant amount of climate data available. You may want to consider hiring an external consultant to help determine the future likelihood of climate events.

Once you understand the historical frequency, consult the resources listed above to understand how your identified climate change threats may change in frequency in the future. Note that changes in frequency should be relative to current frequency. For example, if high heat events today happen with high frequency and climate change projections suggest a slight decrease in frequency, your rating of the likelihood of high heat events may continue to be “High” or may drop to “Moderate.”

These low, medium, and high rankings of likelihood (or whichever terms you would like to use to describe likelihood) for each climate change threat will feed into the prioritization of climate change risks to the supply chain.

Within this framework, ratings of “low,” “medium,” and “high” likelihood, or ratings in between, are subject to your understanding of the weather and climate change threats as they pertain to the supply chain you are assessing. If this qualitative likelihood scale is not parallel to the terminology used for other risk assessments within your agency then you are free to use any terms appropriate to best capture likelihood.

The National Climate Assessment section on Our Changing Climate presents information on observed and future climate trends regarding temperature, precipitation, extreme weather, and other climate threats. This resource, in addition to others found in previous steps, may provide useful insight into the frequency of climate-related impacts and whether they are projected to increase, decrease, or stay the same.

Because this section is focused on understanding the frequency of any level of impact (from minor to extreme), thresholds for frequency may change from threat to threat. For example, a hurricane occurring in an area once per year may be considered a “medium” or “high” frequency, while one day per year with temperatures above 100°F may be considered relatively low frequency.

 

Consequences of Climate Change Threats

Assess the Consequences of Climate Change Threats

To determine if the consequences of climate change impacts on the supply chain would be non-existent, minor, moderate, or catastrophic, consider conducting a self-assessment questionnaire or a workshop. You may want to consider hiring an external consultant to help develop and administer the questionnaire and/or plan and facilitate the workshop. Information on how to develop a questionnaire or a workshop is outlined in the following sections.

Develop and distribute a questionnaire to agency staff and contractors (if appropriate). Some key questions to include in the self-assessment are listed below. Some of these questions may not be relevant to your agency or the supply chain in question while other questions may need to be added to obtain a complete picture of the consequences.

Supply Chain Sensitivity

  • Has the supply chain previously experienced weather-related disruptions?
    • What portion(s) of the supply chain experienced the disruption?
    • For each component that has experienced disruptions:
      • What type of event caused the disruption(s)? (Extreme temperatures, heavy precipitation, flooding, snow, storm surge, high winds, wildfire, or other)
      • How severe and how long was the disruption?
        • Were services and goods still delivered as expected?
      • Were multiple sources of supply built in to the supply chain so that disruptions were minimized?
      • Does flexibility in sourcing exist now that did not exist then?
        • What are the redundancies in sourcing?
        • Do they exist at each link of the chain?
  • Considering climate change projections and the frequency/severity of weather events in areas relevant to the supply chain, are any new exposures to climate change anticipated?
    • What links in the supply chain may experience new threats?
    • What types of events at each link could be expected?
    • If events occur, could the disruptions be severe?
    • Do multiple sources of supply exist?
      • What are the gaps?

Mission Consequences

  • Did past disruptions affect your agency’s ability to fulfill critical services?
    • Would future increases in magnitude of the event affect your agency’s ability to fulfill critical services?
  • If an event has not occurred before, would your agency be able to continue serving its mission during an event?
    • Are there back-up providers or stockpiles of supplies elsewhere?
    • Could emergency contracts be signed to fill any supply gaps?
    • Does continuity of operations planning already sufficiently address this risk?
    • Is there flexibility in sourcing or backups built into the structure of the supply chain so that goods and services can continue to be sourced if one supply route is disrupted?
    • Would any of the back-up services cause unwanted secondary impacts, such as pollution, shortages or delays for other operations, etc.?

Financial Consequences

  • What were the financial implications of past supply chain disruptions?
  • What is the expected cost of delay if a supplier is unable to source goods and services in the time that your agency needs them (based on past experience or expert judgment)?
  • What is the expected cost of goods and services if climate threats disrupt the availability of source or finished materials? Is the change in costs expected to be temporary or permanent?
  • What are potential overtime labor costs for staff to address the supply chain disruption?

Overall

  • Based on answers to the questions above, what is the overall potential consequence of the climate threat to the supply chain (“None,” “Minor,” “Moderate,” “Major,” or “Catastrophic”)? Assign a rating for each supply chain and threat (e.g., extreme heat threat to prefab buildings supply chain, flooding threat to prefab building supply chain).

In addition to presenting questions for discussion, workshop facilitators may find a scenario planning exercise (or two) to be a valuable component for information gathering. Ideally, the workshop will include participants from multiple departments, coming at the exercises from different angles (e.g., logistics, emergency management, procurement/contracting, budget). Possible scenarios to explore in this setting could be:

  • Using a known weather vulnerability (one that has previously occurred), present a scenario in which a particular link in the supply chain is disrupted.
    • Identify the disruptions and the impacts throughout the remainder of the supply chain.
    • How can disruptions be minimized?
      • What is the flexibility in sourcing?
      • What areas could be more flexible while remaining efficient?
    • What are the vulnerabilities that you currently cannot adequately address?
  • Using projected climate vulnerability (e.g., using information gathered from the national or international climate reports), present a scenario in which a particular link in the supply chain is disrupted.
    • Identify the cascading disruptions and the impacts throughout the remainder of the supply chain.
    • How can disruptions be minimized?
      • What is the flexibility in sourcing?
      • What areas could be more flexible while remaining efficient?
    • Would the agency be able to continue serving its mission during an event?
      • What contract modifications or offerings are needed to support the mission effectively?

By utilizing one of the above approaches, or any other that best fits your needs and capabilities, you should at this point have qualitative ratings of the likelihood and magnitude of consequence of each climate change threat. Combining these pieces of information in the next step will inform each threat’s level of risk and relative priority.

Context

The ultimate goal of collecting information on the consequences of climate change impacts on the supply chain is to determine if the consequences would be non-existent, minor, moderate, major or catastrophic. These rankings will feed into the prioritization of climate change-related risks to the supply chain.

To assess the magnitude of consequences of climate change on a supply chain, consider at a minimum the following (see the left panel for more information):

  • How sensitive is the supply chain to disruptions from the identified climate threats (i.e., if a threat were to occur, how easily is the supply chain disrupted)?
  • What are the potential consequences of supply chain disruptions? Consequences are likely to fall into two main categories:
    • Ability to carry out the agency’s mission
    • Financial hardships caused by the disruption

Approaches to Information Gathering

There are several possible approaches to collect information, depending on available financial and human resources. The options recommended in this framework and described at left include:

  • Self-assessment questionnaire – Gather information from agency staff and contractors (if appropriate) via a questionnaire (Note: The Paperwork Reduction Act requires agencies to obtain Office of Management and Budget (OMB) approval if identical information requests are sent to ten or more individuals). Self-assessment questions can be distributed to gather information about historical and potential future weather-related vulnerabilities to the supply chain. Follow-up interviews can help to clarify responses.
  • Workshop – assemble staff (e.g., those in emergency management, contracting, and/or procurement offices) and/or contractors to discuss the impact of past weather events and the resultant impacts. This option requires more resources and agency support, but allows for more interaction and brainstorming.

Rating Consequence Magnitude

Similar to rating the likelihood of climate change threats, ratings of the magnitude of threat consequences depends on the perception of what makes the impact “minor,” “moderate,” etc. Below are some examples of consequence ratings. These can be altered based on the context of your agency, mission, or supply chain(s). For example, in some markets (e.g., telecommunications), a disruption of only a few hours has severe consequences for operations, while other markets can operate with similar disruptions with minimal impact.

No/Insignificant Impact:

  • Services/Physical assets are still available at the same quality
  • Human health and safety remains at the same quality

Minor Impact:

  • Services/Physical assets are still available at the same quality but at higher cost
  • Human health and safety may be compromised
  • Services disrupted at temporal scale of hours
  • Facilities still usable, but damaged

Moderate Impact:

  • Services/Physical assets are available at varying levels of quality but at a temporarily higher cost
  • Services disrupted at temporal scale of days
  • Facilities partly usable or completely unusable for up to a few days
  • Human health and safety may be compromised

Major Impact:

  • Services disrupted at temporal scale of weeks, months, or years, with long-term increase in service costs
  • Facilities out of use for weeks, months, or years
  • Human health and safety may be compromised

Catastrophic Impact:

  • Services disrupted at temporal scale of weeks, months, or years
  • Permanent or long-term increase in service costs
  • Facilities out of use for weeks, months, or years
  • Human health and safety may be seriously compromised

 

Identification of Priority Risks

Use Likelihood and Consequence to Identify Priority Risks
Context
Using risk maps is useful for visualizing priority risks and generating discussions about prioritizing risks. The map, along with supporting information gathered for climate threat likelihood and consequence, can be shared with stakeholders to verify results and identify risk management strategies.

Once you have qualitative ratings for the likelihood and consequence of each threat, identify those with high risk that should be a priority for mitigation by plotting them on a simple risk map like the one shown below . The companion workbook automatically plots threats based on user-entered ratings of likelihood and consequence.

Risk Prioritization Matrix. Once you determine the likelihood of a threat and its potential consequences, you can map the threat onto this figure as a method of prioritizing risks.

PrioritizationMatrixSource: Adapted from Australian Industry Group

While the risk map is informative, it is not an exact science, does not capture all the elements of risk, and should not be the only approach to identify priority risks. Agency staff who have experience with past extreme weather events may be the best suited to “gut check” the results and elevate risks that they advise should be advanced to the planning step. Risks that are moderate to high likelihood and moderate to high consequence should be reviewed in more detail and agencies should consider how to manage these risks

Content developed by the the Office of Acquisition Management, Federal Acquisition Service, General Services Administration.

Share