Chapter 6: Risk Assessment

6.1 Introduction

To ensure that climate change is appropriately factored into local authorities' planning and decision-making processes now and into the future, a sound risk assessment process is fundamental. The purpose of risk assessment, in the context of climate change, is to identify risks and hazards that may be induced or exacerbated by climate change and to evaluate their effects and likelihood. This process also allows the climate change risks and subsequent adaptive responses to be prioritised with confidence and compared equitably with other risks, resource availability and cost issues (including works) that the local authority faces.

The risk assessment described in this chapter has two steps. Firstly, the screening level assessment set out in Section 6.4 will help in determining if a formal risk assessment is necessary for the issue being considered. Secondly, a formal risk assessment process is described. It is intended to be used to identify and evaluate risks for any one issue, but can also be applied to the local authority's operations as a whole.

While this process refers only to the risks associated with climate change, these risks are best assessed together with risks from other hazards and climate variability rather than in isolation. Also this process is not the only one that can be used- where a local authority has an existing risk assessment process climate change could simply be added in.

6.2 Terminology

For the purpose of this Guidance Manual, the following definitions apply.

Risk

The chance of an 'event' induced or significantly exacerbated by climate change, that will have an impact on something of value to the present and/or future community. It is measured in terms of consequence and likelihood.

Hazard

A source of potential harm to people or property, e.g. erosion or inundation.

Event

An incident induced or significantly exacerbated by climate change that occurs in a particular place during a particular interval of time, e.g. floods, very high winds, or droughts.

Consequence (or impact)

The outcome of an event, expressed qualitatively in terms of the level of impact. Consequences can be measured in terms of economic, social, environmental or other impacts.

Likelihood

A qualitative (and possibly quantitative) measure of the probability or chance of something happening.

6.3 Time evolution of risks

A risk may not exist now but may evolve, due to climate change, during the lifetime of the development, service or infrastructure. Consequently, a major difference between traditional risk assessments and those described in this Chapter is the need to consider the lifetime of the development, service or infrastructure.

This risk assessment recognises the time evolution of risks by introducing a planning horizon and considering the risk at various steps along the way. For a lifetime of 100 years the risk may be evaluated as it is now and as it will be in 25, 50, 75, and 100 years time. This allows the user to assess the evolution of response options over time - how much latitude there is in the response options to address the risk. If the risk is not addressed now, despite it occurring only in future, is the community locked into a position where it cannot avoid, remedy or mitigate the risk any more?

6.4 Initial screening

As shown in Figures 1.1 and 1.2, and discussed in Chapters 4 and 5, we recommend an initial screening assessment for a particular council function, activity or service, to indicate whether material climate change impacts are likely. A methodology and checklist for this is provided in Box 5.1. If a screening assessment for a particular function shows that climate change-related risks are likely to be small, then that essentially completes the necessary risk assessment for that function. However, if the screening assessment suggests climate change could have material effects on the function or service, a more detailed climate change effects assessment and formal risk analysis is warranted.

6.5 The risk assessment process

The risk assessment process described in the following sections is based on the New Zealand Standard for Risk Management, AS/NZS4360. A scenario-based approach has been adopted, as suggested in AS/NZS4360 (Section 4.2.3). This involves developing a list of climate change event scenarios applicable to the issue and areas potentially affected, and assessing the risk presented by each scenario. The description in this Chapter has been kept as concise as possible. Reference will need to be made to Chapters 2 to 5 when carrying out the risk assessment.

As large uncertainties are involved in climate change, a mixture of quantitative and qualitative information should be used. While the risk assessment process provides a systematic process, stakeholders must use their judgement, based on a range of information sources, to assess the risks for each hazard scenario.

Steps 1 to 4 are detailed in the remaining sections of Chapter 6. Steps 5 and 6 are only briefly covered, as risk treatment, communication, consultation, monitoring and evaluation are considered organisation-wide initiatives best undertaken in a wider context than climate change risk assessment. Some information on these aspects is included in Chapter 7.

This Guidance Manual provides only an overview. For greater detail of coastal-specific approaches please refer to the companion Guidance Manual "Coastal Hazards and Climate Change".

Step 1: Establish the context

This step 'sets the scene' within which the risk assessment process takes place - defining what the local authority is responsible for, what it owns, what services it provides, its structure and its objectives, and considering what climate change may affect. This step helps to clarify the bounds of responsibility, and ensures all the risks, the risk acceptance and risk aversion of the local authority are addressed.

Establishing the context can be undertaken by defining the strategic context, organisational context and the climate change context.

Step 1.1: Define the strategic context - what the local authority is responsible for and is aiming to achieve

The strategic context should take into account the following areas within the local authority:

• local authority strategic plans (see Chapter 7 for more details)
• the assets it has, functions and services it provides (Chapter 4)
• the physical environment, and
• the stakeholders (including other local government stakeholders).

Step 1.2: Define the organisational context - what resources and information the local authority has

The organisational context should look at the structure of the local authority, including:

• staffing
• locations
• IT systems and data available
• goals and objectives.

Step 1.3: Define the climate change/risk assessment context - what is the problem/driver and what is to be done about it

The climate change and risk assessment context involves defining the scope and key performance indicators for these activities, including:

• defining the current or foreseen problem, or the activity to be undertaken
• the climate change variables (Chapter 2), climate change variability (Chapter 3)
• specifying the outcomes anticipated from the risk assessment process and how they are going to be used in planning and decision making (Chapter 7).

Step 2: Identify hazards and describe risks

Once the context has been established a range of hazard event scenarios can be developed for each locality and/or activity, with specific assumptions about the community context. The risk can then be described.

With a complex issue a workshop environment is useful, involving all key stakeholders - policy planners, regulatory manager, engineers, and emergency management co-ordinator, with input from regional council planners and scientists, as required. The process can then be expanded to include community representatives as needed.

Step 2.1: Identify localities by land use, natural resources, development and services provided

The affected locality or list of localities that may be affected by the development or issue under consideration can then be addressed. The localities will be characterised by varying land use, natural resources (e.g. river, lake) and development factors. It is important to include a brief description, if possible, of the known history of hazards and services provided.

Step 2.2: Identify hazard type based on current and historical information

Depending on the extent of the activity or issue, climate change event scenarios relevant for each locality, and the local government functions provided there, need to be identified. These can be taken from Figure 4.1 Local Government Functions and Possible Climate Change Outcomes (which are not necessarily exhaustive), and Figure 4.2 Sensitivity of Natural Resource to Present Climate and Climate Change.

Step 2.3: Identify long-term changes in hazard due to climate change or other processes

Identify the effects that climate change could have on the hazard, taking into account the planning horizon for the activity. The information gained from earlier chapters will be useful during this step. The regional policy statement, or the life of the infrastructure or asset, dictate the planning horizon. For example, climate change effects for a greenfield subdivision may need to be considered over a 100-year planning horizon in accordance with the regional policy statement. Over this time horizon the overall hazard could increase markedly, due to both coastal erosion and inundation hazards.

Note that Step 2.1 may come after Steps 2.2 and 2.3, depending on whether the issue is driven by a specific proposal or activity, or by more generic resource investigations.

Step 2.4: Choose the consequence scenario and time reference

Choose a range of plausible consequences that could result from the hazards identified in Step 2.2 if no additional measures are taken to avoid, remedy or mitigate the hazard. It is recommended that these range from moderate impacts to very large ones and involve time references up to the planning horizon, e.g. the likelihood of X happening now is rare, but it is possible in 50 years and likely in 100 years. Small impacts that occur frequently may also be considered.

Step 3: Analyse the risk

Having identified the list of hazard scenarios in Step 2, the next step is to analyse the risks presented by those hazards over the lifetime of the development, asset or infrastructure. The objective is to separate the minor acceptable risks from the major risks and to provide data to assist in the evaluation and treatment of risks. Risk analysis involves consideration of the sources of risk, their consequence and the likelihood that those consequences may occur at each intermediate time step in the lifetime of the development, asset or infrastructure.

Step 3.1: Assess consequence of hazard occurring

Assess the level of the impact (consequence) on the land, built environment and people for each hazard scenario in the time indicated. Refer to Section 4.2 Assessing Effects for assistance with choosing the appropriate level of impact. The choice of the appropriate level of impact is somewhat subjective, but if the approach is applied consistently for each locality and scenario, the choice of the relative level of impact should be consistent. The local authority may wish to assign the impact in a more quantitative way using a dollar equivalent and/or looking at the economic, environmental, social and cultural impacts separately.

Once the analysis has been done, choose the appropriate level of impact from Table 6.1.

Table 6.1: Level of impact for locality/hazard scenario

Designation	Impact	Examples
1	Catastrophic	Huge financial losses involving many people and/or corporations and/or local government Large long-term loss of services Permanent loss of many people's homes; large-scale loss of employment Loss of life or serious injury
2	Major	Major financial losses for many individuals and/or a few corporations Some long-term impacts on services Some homes permanently lost Complete loss of an important natural environment Serious injury
3	Moderate	High financial losses, probably for multiple owners Disruption of services for several days; people displaced from their homes for several weeks; major impacts on valued natural environment
4	Minor	Moderate financial losses for small number of owners; disruption of services for a day or two; moderate distress to some individuals; some impacts on significant natural environment
5	Insignificant	Minimal financial losses; short-term inconvenience

Several scenarios may need to be considered for each locality. They will have different levels of impact.

Note: Take care not to be influenced by vulnerability due to other natural factors, or effects of climate change, when assessing level of impact. This will be assessed in Step 3.2.

When assessing the level of impact, consider a range of issues, such as:

• What is the existing and future density of development?
• What are the approximate/relative values of the assets, in measurable terms (e.g. in dollars per metre squared, or in dollars per metre of coastline)?
• Is the value of the assets likely to rise markedly in the future (e.g. because of redevelopment of residential property)?
• Is the effect of the hazard a brief inconvenience (such as road flooding) or high cost (e.g. flooding of many houses, destruction of property due to landslides, or several days inundation of pasture)?
• Are assets easily relocatable (e.g. for flooding cabins at a camping ground with no plumbing/drainage services, compared with concrete slab-on-grade houses)?
• How should publicly owned land be valued, especially in relation to privately owned land? (Care is needed to avoid public land being sacrificed in order to protect private property, without proper benefit/cost assessment)
• Are there particular environmental issues to be considered(e.g. undermining of septic tanks or erosion or waterlogging of effluent disposal fields, causing water pollution)?
• Are there particular social issues that need to be considered (e.g. housing occupied by people who have limited ability to recover from financial losses, or cultural ties and rights to an area)?
• What are the insurance implications (e.g. are responsibilities clear, can they be covered via insurance, are all people at risk equally aware of the risk and liabilities)?
• Is the effect of the hazard continuous (for example, coastal erosion) or intermittent (e.g. flooding)?

Step 3.2: Assess likelihood of hazard scenario

For each time step in the planning horizon assess the likelihood (or probability) of the hazard event scenario occurring. Choose the appropriate likelihood from Table 6.2. For more clarity, some local authorities may wish to quantify the likelihood in terms of time as daily, monthly, annual, several times per lifetime etc.

Table 6.2: Likelihood of scenario occurring within the selected planning horizon

Designation	Frequency	Description	IPCC definition
			Virtually certain (> 99% chance that a result is true)
A	Almost certain	Is expected to happen, perhaps more than once	Very likely (90-99%)
B	Likely	Will probably happen	Likely (66-90%)
C	Possible	Might occur; 50/50 chance	Medium (33-66%)
D	Unlikely	Unlikely to occur, but possible	Unlikely (10-33%)
E	Rare	Highly unlikely, but conceivable	Very unlikely (1-10%)
			Exceptionally unlikely (<1%)

Note: If you are reading material prepared by the IPCC their definition of likelihood is very similar, as expressed in the right-hand column of Table 6.2.

When assessing the likelihood, the following factors need to be considered:

• type of hazard and its likelihood
• natural resource factors
• changes to likelihood from climate change.

Note: Although the risk assessment process is designed for use by non-experts, this phase ( likelihood assessment) would benefit from input from people with specialist knowledge or who can access monitoring and historical data. Regional council staff or specialist consultants might provide this.

Hazard type and likelihood

Refer to Chapter 2 for a description of the climatic variables that may be influenced by climate change and the amount of change and likelihood of it occurring in the area being evaluated.

Natural resource type

The type of natural resource will strongly influence the likelihood of impacts, depending on the hazard type. Refer to Table 4.2 for detailed descriptions of the sensitivity of natural resource types to climate change.

When carrying out the likelihood assessment, a series of questions should also be developed and addressed, such as:

• Is there a history of hazard experience at the site? Can this history be objectively assessed to determine likelihood of future impacts (e.g. what is the present return period for different flood levels, how often has coastal erosion occurred, under what conditions, how much, etc)?
• Are certain parts of the locality more exposed than others to specific hazards, such as predominant winds/storm direction?
• Is local knowledge based on an adequately long timeframe (e.g. how long ago was the last major flood and how large was it)?
• Do regional council staff have any relevant information?
• Is the planning horizon sufficiently long (say greater than 30 years) that climate change effects will increase the likelihood of the event?
• How will climate change affect the hazard (e.g. increase in mean sea level, increase reduction in return periods for major floods, duration of drought)?

Step 4: Evaluate the risk

Use the results from Tables 6.1 and 6.2 to position the activity in Table 6.3. This will allow the risk of each hazard scenario to be arrived at. For example, an activity with moderate (3) consequence but which is unlikely to occur (D) has a risk of M (moderate risk), should be included in response planning but lower priority. Remember, a different risk rating will be assigned for each time step.

Table 6.3: Risk table

Year	Consequence
Likelihood	1 Catastrophic	2 Major	3 Moderate	4 Minor	5 Insignificant
A (almost certain)	E	E	E	H	M
B (likely)	E	E	H	H	M
C (possible)	E	E	H	M	L
D (unlikely)	E	H	M	L	L
E (rare)	H	H	M	L	None

Legend:

E: Extreme risk; immediate action required

H: High risk; high priority for action, begin planning as soon as practicable

M: Moderate risk; include in response planning, but lower priority.

L: Low risk; minimal action likely to be required; monitor the situation

None: Negligible risk; no response required

Please note that this is one example and that each local authority needs to decide the risk classifications or which squares are H, M or L.

Step 5: Assess appropriate responses based on the risks

Steps 1 to 4 should result in a good understanding of the implications and risk of climate impact. Once this is done, particular types of climate change risks can be placed in the context of other types of risks, and in the context of each other, within a district or region.

Risk assessment should take place in a context of continuing reassessment and review, where the responses relating to risks (council decisions) are also taken within the context of a range of statutory and other responsibilities, including responsibilities to consult and plan ahead.

Chapter 7 addresses the context of adaptive response options.

Step 6: Communication and consultation, monitoring and evaluation

At each step of the risk management process, communication and consultation and monitoring and evaluation are important considerations.

It is important to develop a communication plan for both internal and external stakeholders, addressing issues relating to climate change, the associated risks and the process to manage them. Ideally this should be a part of the overall local authority communication and consultation plan.

It is necessary to monitor climate change and the associated risks, as well as the effectiveness of any risk treatment plans and strategies. Risks and the effectiveness of control measures need to be monitored to ensure that changing circumstances, such as climate change speed and scale or land use type, do not alter risk priorities. Even outside of climate change, few risks remain static.

Ongoing review is essential to ensure that the risk mitigation plans remain relevant. Factors that affect likelihood and consequences may change and so the suitability, timing or cost of the various treatment options may also change. It is therefore necessary to regularly repeat the risk assessment process. Note that revisions should be simpler and less time consuming if the framework has already been developed.

6.3 Best practice guidance

It is recommended that:

• Climate change risks are evaluated against other non-climate risks operating over the same time frames.
• You note that because climate change risks evolve over time, your response options may become locked in if you delay decisions because a risk is low initially but increases over time (due to existing use rights, or increasing costs of responses due to increasing development).
• A risk assessment is carried out initially using a screening analysis. If the risk is found to be non-negligible and the cost or significance of the asset or service is high, a more in-depth risk analysis is carried out involving all relevant stakeholders and making use of detailed climate scenarios.
• To be most effective and present the lower costs, a climate change risk assessment is done in the context of an overarching plan review, asset or infrastructure upgrade or re-design.

---

Site accessibility

Feedback or questions?
Email information@mfe.govt.nz

Legal statements