The Cost of Inaction 2024

Using a scoring approach, a biopharmaceutical company is building resilience against business disruptions across its value chain. The company assessed critical assets in its own operations as well as those of its key suppliers. Having mapped out the relevant assets, the company analysed them against climate hazards such as flood, heat, frost, wind and wildfires. Using a hazard, exposure and vulnerability framework, the company identified high-risk areas and then short-listed the sites that needed deeper assessment for quantification of potential financial impact and entered into discussions on adaptation measures with high-risk suppliers. Source: BCG.CASE STUDY 2 Most material physical risks of a biopharma company Financial quantification relies on more complex calculations and asset-specific input. The economic impact is estimated using damage functions in a three-step approach : –For each location, obtain data on the distribution of climate hazards across several warming scenarios, time horizons and probabilities (e.g. distribution of flood depth for a so-far “1-in-100- year” flood in Europe by 2050 under a severe warming scenario). –For each asset, assess the damage caused for different levels of the climate risk hazard (e.g. percent of asset value damaged due to flooding) . –For each asset, calculate the economic impact (e.g. asset restoration cost, revenue loss, extra maintenance cost) .As climate change reality hits, it’s critical for any company to integrate climate-related scenario analysis into its risk management framework and assess both the physical risks and transition risks and opportunities over the short, medium, and long term. We are committed to developing and implementing the necessary strategies for ourselves and our customers. Olivier Blum, Chief Executive Officer, Schneider Electric The Cost of Inaction: A CEO Guide to Navigating Climate Risk 39