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Framework Step 3: Plan

What Can Be Done to Reduce the Consequences of Climate Risk?

Determine what can be done to reduce the risk of observed and expected changes to climate by working through three sub-steps:

  1. Identify who is accountable for the supply chain
  2. Develop climate risk management strategies
  3. Evaluate the risk management strategies to select which strategies to implement

The intended outcome of this process is a prioritized list of feasible and effective risk management strategies. To facilitate implementation of the strategies, assign responsibility to the appropriate person, department, or agency, and set a timeline for implementation.

Identify Who is Accountable for the Supply Chain

Context
Identifying all parties who are accountable for or use the supply chain will prepare you to consider the risk management strategies that each of these groups could potentially take on. This will allow you to develop a more robust set of strategies in the next step.

Before developing risk management strategies, consider who is responsible for the supply chain in question. It may be:

  • A single department or several departments internal to your agency (e.g., acquisitions, supply chain management, emergency services, and mission assurance).
  • External agencies, who may play a role if the good/service is procured through a government-wide contract vehicle (e.g., GSA Multiple Award Schedules, NASA SEWP).
  • Contractors who are handling the sourcing, production, and delivery logistics of the supply chain.

At this point in the process, it is beneficial to be more rather than less inclusive of additional groups.

Once the responsible group(s) are identified, collaborate with them to develop risk management strategies. Everyone brings their unique perspectives and levers for action to the conversation, so participation across groups and agencies is likely to facilitate a more robust set of risk management strategies. For example, while GSA may be able to offer multiple sources of supply, it is up to the ordering agency to develop contingency plans if anything were to go wrong and to decide their individual tolerance for potential disruptions.

Risk Management Strategies

Develop Climate Risk Management Strategies
Context
There is a wide range of risk management strategies available to Federal agencies. In this step, you will brainstorm a full suite of strategies that may help reduce climate risk to the supply chain. Thinking broadly during this process will help to ensure that no opportunity is left unexplored. Note that many strategies to address climate impacts may be very similar to strategies your agency already employs to address other risks it faces. Consider whether there are current risk management strategies that can be adjusted to handle climate threats.

Develop the risk management strategies to directly address the known risks—either those already experienced or those identified through the risk assessment process. By mapping the strategies to the risks, you get a direct link from problem to solution.

Strategies should be specific and action-oriented, with a clear assignment of responsibility (e.g., to a specific group or a specific person) and a timeframe for implementation. Types of strategies for Federal agencies include:

  • Risk mitigation – Many Federal agencies have advanced emergency management divisions that could integrate the identified climate risks into their work. For example, Continuity of Operation Plans (COOPs) and other contingency planning documents/practices can prepare an agency to respond to future supply chain disruptions. Additionally, building in multiple sources of supply (e.g., through multiple award contracts) can help to mitigate the risk from a single vendor failing to deliver goods or services during a weather/climate event.
  • Risk transference – As Federal agencies increase their reliance on contractors, some are also pushing risk management responsibilities onto their contractors by building in provisions requiring delivery without lapse even with factors previously considered outside of the contractor’s control (e.g., an ‘Act of God’). Consider if current contracting terms offer an acceptable level of protection against risks or guarantee delivery regardless of weather events. For example, contract penalties for failing to meet contract requirements can shift some risk back to the contractor. Depending on the perceived risk, it may or may not be warranted to specifically call out climate risks in the contract and to require the contractor to have a risk management plan. Implementing these strategies may increase the contract costs.
  • Risk avoidance – Would an alternate, less risk-prone supply chain (e.g., flexibility in contractors, order fulfillment, capacity, visibility, dispersion) be able to meet your needs? Alternatively, contractors could be evaluated during the contract evaluation process on whether or not they consider climate risks. A simple, binary answer could help inform the selection of the most all-around qualified contractor. Alternatively, you may be able to find relevant information for contractors who report to CDP or the Global Reporting Initiative (GRI) or you may be able to require contractors to report to CDP or GRI.
  • Risk acceptance – At times, it may be too costly to avoid or mitigate risks. In these situations, consider whether risk acceptance is a potential strategy. In this situation, the agency acknowledges the risk and decides to accept its consequences if it occurs.
  • Adaptive management – Track threats, impacts, costs, and effectiveness of adaptations and post-disaster response to inform the aforementioned categories of adaptation. This type of disciplined tracking of climate or weather impacts serves as an interim adaptation strategy to help both determine whether and what adaptation actions are necessary as well as develop a quantitative basis for investments and/or reimbursements.

To develop strategies, review examples and best practices from other agencies and engage a diverse range of staff within the organization. Staff with longer tenures frequently know the issues that arise during extreme weather events and can identify solutions to the problems.

Selecting and Implementing Risk Management Strategies

Evaluate, Select, and Implement Risk Management Strategies

Develop a priority list of risk management strategies through a systematic evaluation process. If your agency has established evaluation criteria for projects through other processes then a variation on those criteria may be an effective tool. If no such criteria exist, the following criteria may provide a useful starting point:

  • Technical and Political Feasibility – How practical is it for a particular strategy to be implemented, accounting for technical, policy, legal, and insurance considerations?
  • Cost and Benefits – What are the costs associated with upfront implementation and ongoing operations and maintenance? If implemented, what is the value of the damages from expected changes to climate that would be avoided? In order to increase efficiency, the Federal government strives to spend efficiently while ensuring that investments are made to reduce their exposure to major impacts. Agencies do not want to spend too much to prepare for events but also do not want to have to pay more to continue doing business during extreme events.
  • Efficacy – If implemented, to what extent would the strategy reduce the risk?
  • Flexibility – If implemented, how easy would it be to revise the strategy at a later date? What is the adaptive management potential of the strategy?
  • Sustainability – If implemented, what would be the environmental benefits of the strategy? Does the strategy advance the "triple bottom line” of sustainability (i.e., what are the impacts to the economy, society, and particularly the environment)?
  • Implementation Timeframe – How soon does this strategy need to be implemented in order to be effective?

Depending on your needs, the evaluation can be qualitative or quantitative in nature. A qualitative evaluation process is generally sufficient for selecting priorities while a quantified evaluation may be necessary in order to justify funding. A qualitative evaluation may use a simple three point or five point scale (e.g., low, medium, high or positive, neutral, negative) or rely on a narrative description of the pros and cons of the strategies.

Using the evaluation findings and other considerations (see side bar), select the most promising and feasible strategies to implement. The final strategies selected should be specific and action-oriented, with a clear assignment of responsibility (e.g., to a specific group or a specific person) and a timeframe for implementation.

Context

Federal agencies are unlikely to be able to fund or implement their entire “wish-list” of risk management strategies. In order to narrow the menu of strategies to a prioritized list, you can use a systematic evaluation process.

The number of evaluation measures should be limited to allow for the output to be digestible and meaningful.

Other Considerations when Selecting Risk Management Strategies

While evaluation metrics are a useful tool for informing the decision-making process, they should not be the sole basis of decisions. The input of the staff who work on these programs on a daily basis and of the decision makers who understand the needs of agencies and the communities with which they work are also important factors to consider when selecting strategies.

In addition, consider phased implementation of the risk management strategies. Prioritize strategies with co-benefits for near-term implementation. These win-win strategies increase resiliency to observed and expected changes in climate and help to achieve other program objectives. It can also be easier to secure funding since they accomplish multiple goals. The near-term strategies can then lay the groundwork for more ambitious or comprehensive strategies that become necessary as the rate and severity of climate impacts increase. Phased implementation is a fiscally responsible way to break down climate risk management into steps, implementing those that are the most needed first and building upon them as the frequency and severity of climate impacts increase in the future.

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

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