Risk Analysis and Climate Change

As I have written before, risk analysis is one of my favorite parts of project management. I like to determine what the concerns, as well as the potential upside, of all my projects. By defining our projects’ threats, we can address them and demystify the ambiguity around them. Likewise, identifying the opportunities allows us to see the hidden potential our work efforts have. However, sometimes risk analysis can be daunting because even if we can identify a risk, we cannot always find the best approach to address it.

Risk Analysis and Climate Change

Climate change has become an increasingly common risk in almost every industry. And I only say almost to allow for the possibility of some industry, which I cannot think of right now, which is not affected in one way or another by climate change. But also, climate change is affecting our personal lives regularly, which presses us to identify those risks and find solutions. For example, the heat waves and California fires are affecting our elderly relatives and the young ones who can develop breathing disorders, such as asthma, by inhaling smoke at such a young age.

So, how do we analyze risk caused by a new source, and which we are unsure how it will develop and to what extent? It can be overwhelming to digest all the information, bad news, and promises made as to how we will fix the problem of climate change in our lifetime and future generations. For example, we owned a cabin on the north shore of Lake Tahoe and had been considering renting it out seasonally; currently, the cabin is rented out on a long-term basis. Therefore, we weighed the pros and cons of converting the cabin into a short-term rental (STR), which can be challenging but would allow us access to it throughout the year. So, I started to run a risk analysis for the STR, such as more wear and tear (threat), higher rent during the summer and ski season (opportunity), etc. And just when I was getting close to reaching a decision, fire season started, and for the first time, the Tahoe basin was in danger.

At this writing, the Caldor fire is approaching the South Shore, which is far away from the North Shore. However, it is obviously a risk to consider for this current season, but definitely for future years unless something dramatic changes. So now, the question may not be whether or not we can allow ourselves the luxury of using our own place now and again, but rather will the cabin still be there next year or the year after. Will we have to rebuild? Will we have to sell? Will we be spared, and the cabin generates more income through our retirement years? In other words, this risk is bifurcated not just by threats and opportunities but also by the genuine “change” in the equation that that asset may no longer exist. Therefore, I am approaching this issue by a “bifurcated risk analysis” in which there are two projects for the same product. The trick will be in forecasting how much worse climate change will get, as well as how much better we will begin to address it.

Risk Analysis and Climate Change

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