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6 Risk Assessment

Key points:

  • Use risk assessment techniques to rank risks, and include ranking types of climate change risks against each other and against other risks.

  • Do a screening assessment of the issue first, to identify key risks for the region, district or area, or to obtain preliminary guidance on the climate change-related risks associated with a particular function or service. Then, if warranted, do a full risk assessment.

  • Follow accepted methods, which are usually already familiar to local authorities.

  • Take into account the time context in evaluating risk. This means that a single risk assessment may involve repeated assessments for different time scales.

  • Use the best information available for the local area. Where risks are found to be high or extreme, consider seeking additional information prior to decision-making.

  • Decisions can then be made on appropriate responses and plans can be developed for communication, consultation, monitoring and evaluation.

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 procedure 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 procedure 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 procedure described in this chapter has two steps. Firstly, the screening assessment set out in section 6.4 should be used. This step will help determine whether a formal risk assessment is necessary for the issue being considered. Secondly, a formal risk assessment process, as described in the subsequent sections, should be followed. This process is intended for identifying and evaluating risks for a single issue but it can also be applied to the local authority’s operations as a whole.

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

6.2 Terminology

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

Risk
The chance of an ‘event’ being induced or significantly exacerbated by climate change, that event having an impact on something of value to the present and/or future community. Risk is measured in terms of consequence and likelihood.
Hazard
A source of potential harm to people or property. Examples are erosion or inundation.
Event
An incident that is induced or significantly exacerbated by climate change and that occurs in a particular place during a particular interval of time. Examples are 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
The probability or chance of something happening (can be a qualitative or quantitative measure).

6.3 The evolution of risks over time

A risk may not exist now but may evolve, owing 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 introduction of time. The time factor/horizon that must be considered is the lifetime of the development, service or infrastructure.

This risk assessment, therefore, recognises the time evolution of risks by introducing a planning horizon and it includes considering the risk at various steps along the way. That is, 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 regular evaluation allows the user to assess the evolution of response options over time – that is, of how much latitude there is in the response options that address the risk. If the risk is not addressed now, despite it occurring only in the future, the community may very well end up being locked into a position where it cannot avoid, remedy or mitigate the risk any more.

6.4 Initial screening

As shown in Figures R1 and R2, and discussed in chapters 4 and 5, we recommend an initial screening assessment for a particular council function, activity or service, to determine whether material climate change impacts are likely. A methodology and checklist for carrying out such an assessment 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 the necessary risk assessment has been completed for that function. However, if the screening assessment suggests that climate change could have material effects on the function or service, a more detailed assessment of climate change effects and formal risk analysis as outlined in the remainder of this chapter are 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 2–5 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 is systematic, the 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, that are best undertaken in a wider context than just climate change risk assessment. Some information on these aspects is also included in chapter 7.

This Guidance Manual provides only an overview. For greater detail on coastal hazards see Coastal Hazards and Climate Change (MfE 2008).

Figure 6.1: The risk assessment process.

 See figure at its full size (including text description).

Step 1: Establish the context

This step ‘sets the scene’ within which the risk assessment process takes place. Establishing the context involves 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 that all the risks, and the risk acceptance 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

  • 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 sources of the local authority, including:

  • the staffing

  • locations

  • IT systems and data available

  • goals and objectives, etc.

Step 1.3: Define the climate change and risk assessment context – what the problem and/or driver is, 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. This includes:

  • 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 – including the issue(s), problems or activities to be assessed – has been established, Step 2 involves developing a range of hazard event scenarios for each locality and/or activity, with specific assumptions about the community context; and then describing the risks associated with each.

With a complex issue, this step can be carried out in a workshop environment, involving all key stakeholders. For example, policy planners, the regulatory manager, engineers and the emergency management co-ordinator should be involved, with input from regional council planners and scientists, where 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

Firstly, the affected locality or list of localities that may be affected by the development or issue under consideration should be discussed. The localities will be characterised by differences in land use, natural resources (eg, river, lake) and development factors. It is important to include a brief description of the known history of hazards and services provided, if possible.

Examples might include:

  • residential; on the hillside, with clay soil with the potential to liquefy if water is retained; erosion is a problem. Services: water supply, wastewater, stormwater, roading, Civil Defence and Emergency Management

  • residential and commercial; on flood plain of a major river, flooding has been a problem in the past. Services: watercare, water supply, etc.

  • agricultural on a flood plain of major river; water shortage is a problem in dry seasons

  • major state highway and railway line adjacent to a river or estuary

  • proposed residential subdivision and small shopping centre; on greenfields site, bordering a sedimentary rock sea cliff with a history of intermittent erosion (stable for last 10 years).

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

Depending on the extent of the activity or issue, the event scenarios relevant for each locality, and the local government functions provided there, need to be identified. These can be taken from Tables 4.1 and 4.2.

Example

A proposed new subdivision on the first land-use type example given above (residential land, on hill) would not be vulnerable to inundation but would be vulnerable to increased erosion due to increased rainfall, and increased water shortage, etc.

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 service or activity. The information gained from earlier chapters should be used 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, owing 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. These should range from moderate impacts to very large ones and involve time references up to the planning horizon, eg, ‘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.

Example

Location: Nikau Bay, Marlborough

Scenario: Inundation to 0.5 metres above mean sea level, MSL (ie, to just above most house floor levels) for 100 m inland (ie, the first two rows of houses behind the beach), but no major erosion.

The Regional Policy Statement has a planning horizon of 100 years (therefore, likelihood is evaluated in time steps up to 100 years).

Likelihood:

Likely > 100 years

Possible 75–100 years

Unlikely 25–75 years

Rare 0–25 years

Impact/consequence:

Human:

  • No loss of life, possible injury.

  • Possibly elderly people trapped in their homes.

Economic:

  • Negative impact upon regional reputation and tourism industry.

Social:

  • Temporary loss of access through Queen Charlotte Drive.

Infrastructural:

  • Water supply: possible contamination

  • Wastewater: possible leakage (public health risk).

  • Damage and disruption to road (temporary disruption to access in and out).

Geographic:

  • Possible wastewater contamination of streams in the bay.

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 considering the sources of risk, the risks’ 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 4.3 for assistance with choosing the appropriate level of impact. The choice of the appropriate level of impact is somewhat subjective. However, so long as the approach is applied consistently to each locality and scenario, the choice of the relative level of impact will be consistent. To assist in this assessment, the local authority may wish to state the level of 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 a locality and/or 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

For each locality, there may be several scenarios that need to be considered. These scenarios 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 or relative values of the assets in measurable terms (eg, in dollars per square metre, or in dollars per metre of coastline)?

  • Is the value of the assets likely to rise markedly in the future (eg, because of redevelopment of residential property)?

  • Is the effect of the hazard a brief inconvenience (eg, road flooding) or high cost (eg, flooding of many houses, destruction of property due to landslides, or several days inundation of pasture)?

  • Are assets easily relocatable (eg, for flooding cabins at a camping ground with no plumbing/drainage services, compared with flooding 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 (eg, 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 (eg, 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? For example, 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 (eg, coastal erosion) or intermittent (eg, 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 additional clarity, some local authorities may wish to quantify the likelihood in terms of time (ie, 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, its definitions of likelihood are very similar, as expressed in the right-hand column of Table 6.2.

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

  • type of hazard and its likelihood

  • natural resource factors

  • changes to likelihood caused by climate change.

Note: Although the risk assessment process is designed for use by non-experts, this phase (ie, 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.

Example

The hazard scenario might be erosion effect from a 1% AEP storm on a sandy coast; the planning horizon might be 50 years.

The assessed level of impact might be designated 3 (moderate) in Step 3.1; the likelihood under the present situation might be D (unlikely); but when we take into account climate change, this might be elevated to C (likely) in 25 years’ time.

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 (eg, what is the present return period for different flood levels, how often has coastal erosion occurred, under what conditions has coastal erosion occurred and how much, etc)?

  • Are certain parts of the locality more exposed than others to specific hazards, such as predominant winds or storm direction?

  • Is local knowledge based on an adequately long timeframe (eg, 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 20 years) that climate change effects will increase the likelihood of the event?

  • How will climate change affect the hazard (eg, will it cause an increase in mean sea level, or an increase reduction in the return periods for major floods or 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 yield the risk of each hazard scenario. For example, an activity with moderate (3) consequence but which is unlikely to occur (D) has a risk of M (moderate). It should be included in response planning but given lower priority. Remember, there will be a different risk rating assigned for each time step.

Table 6.3: Risk table.

Year

Likelihood

Consequence
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 determine its own risk classifications or which squares are ‘H’, ‘M’ or ‘L’.

Example

A risk may have a consequence of 4 (minor), a present likelihood of D (unlikely), but will become C (possible) in 30 years and B (likely) in 100 years. Thus, the risk rating will go from low to high in the next 100 years.

Step 5: Assess appropriate responses based on the risks

Steps 1 to 4 should result in a good understanding of the implications of and risks associated with climate impact. Once completing these steps, 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 assessment and management process, communication and consultation, and monitoring and evaluation are important considerations.

A communication plan should be developed for both internal and external stakeholders. This plan should address issues relating to climate change, the associated risks and the process to manage them. Ideally, this plan should be a part of the overall local authority communication and consultation plan.

It is necessary to monitor climate change and its 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 will generally be simpler and less time consuming once the framework has been developed.