10 steps to master climate risk from the experts at dss+
Global consultancy dss+ works to transform how high-hazard industries manage operational risk. As the firm looks to help its clients navigate one of the greatest risks of all in the modern world, it has set out a 10-step framework, designed to quantify climate risk exposure for boards and executive teams.
In 2024, the EU’s climate service reported that global temperatures had breached the 1.5C barrier for the whole previous year. The following 12 months blazed past that, becoming the hottest year on record – and while scientists maintain the point of no return has not quite been reached, recent research has suggested the Earth has only two years left of its ‘carbon budget’, and that the planet is currently on course for heating of 2.7C; even higher than the Paris Agreement’s upper-limit of 2C.
Amid this, the impacts of climate change have become increasingly apparent, with extreme weather events causing droughts, wildfires, floods and unprecedented storms. And amid the devastating human cost of all this, many businesses may soon feel it where it hurts them most, too: their wallets. One study from Capgemini Invent recently estimated the world’s largest companies could lose up to $1 trillion per-year to climate risks – an alarming prediction, which suggests firms should be planning to mitigate these risks, sooner, rather than later.
Indeed, boards and investors are already asking harder questions: not just whether climate risk is understood, but whether it has been quantified in a way that guides capital allocation and operational planning. And as they look to adjust their operations accordingly, dss+ has issued 10 pieces of key guidance to help them on that journey.
Speaking at the release of the methodology, Gerhard Bolt, principal at dss+ commented, “When climate transition becomes directly connected to operational risk and financial outcomes, it becomes a powerful lever for long-term resilience and value creation. Our new framework gives mining companies a precise view of where they are exposed and which interventions will deliver the highest return on investment. The methodology integrates advanced analytics, engineering insight and organisational readiness into one decision-ready system.”
Before we begin
Understanding where a company stands currently is the foundation for building a roadmap toward resilient and sustainable operations. As such, dss+ explicitly states that before any formal action is taken, it is important to understand the state of play at a company. In the case of its study, dss+ said it uses the Bradley Curve to evaluate this maturity, which typically ranges from Reactive – where responses are driven by compliance and past events – to Interdependent, where climate resilience is embedded across all functions and supported by a proactive culture of collaboration and innovation.
The firm’s analysts note, “This assessment highlights the gap between your current state and what is required to reduce climate risk to as low as reasonably possible. Moving up the curve involves shifting from isolated, compliance-driven actions to integrated strategies that anticipate future climate impacts, operationalise risk mitigation, and foster continuous improvement.”
Step 1: Short-listing climate hazards
Depending on where a firm is based, and which parts of the world its supply chain ranges through, it will face different climate change impacts. For example, in landlocked nations, tropical storms may not be a risk, but wildfires or floods may still be. As a result, the first step to mastering climate risk management involves identifying which hazards a company needs to prepare for in the first place.
“Hazards should be shortlisted using historic incidence, insurance data, academic research, and industry-specific trends, focusing only on those expected to change significantly over time,” dss+ explains. “At dss+, we leverage Earthscan by Mitiga Solutions to model anticipated changes under low, medium, and high emissions scenarios across multiple timeframes through the end of the century. Figure 2 provides an example of increased risk indices for several climate signals and a detailed maximum temperature assessment over time.”
Step 2: Reviewing receptors
Once a firm is clear on the hazards it may face, it then needs to explore how it may be impacted. That means it will need to identify systems or components which could be hit by extreme weather. There are many ways of executing this step – from an industry scan seeing how similar firms have reported being impacted by climate risks; to examining academic literature; to reviewing site documents; and conducting selective site-visits to map critical components.
The researchers add, “This process is conducted at the site or operations level and should cover all locations in the value chain where significant changes in climate signals are anticipated.”
Step 3: Combining vulnerabilities
With hazards and receptors identified, dss+ recommends combining them into a cross-hatched ‘Vulnerability Matrix’. This matrix assesses how each climate hazard could impact each critical system or value chain component at a company – with the findings forming the foundation for quantifying value at risk, and prioritising adoption measures which are the most urgent.
Setting out their own method, dss+’s experts note, “Our approach begins with an AI-assisted literature review to identify known or anticipated vulnerabilities... This desktop analysis is then validated through site visits with subject matter experts to stress-test the resilience of equipment, systems, and processes against projected climate changes. Engagement with maintenance engineers, facility managers, plant managers, OEMs, and procurement teams ensures practical insights into operational constraints and failure modes. Preliminary hotspots are flagged based on potential infrastructure damage, increased corrosion-related maintenance, production losses and risks to personnel safety.”
Step 4: Assess the value of risk
To help ensure senior leadership buy-in, the risks identified should now be translated into financial terms. Developing ‘damage functions’ (mathematical models that estimate potential losses for each receptor-hazard combination under specific climate scenarios) can provide a clear visualisation of value at risk (VAR) across the value chain, enabling identification of financial hotspots and guiding cost-effective adaptation strategies.
“Most damage functions will be based on original design criteria and the state of equipment when commissioned but ignores poor asset integrity or inadequate maintenance that amplifies climate related VAR,” the researchers explain. “For example, if extreme precipitation of 500 mm in a day is projected under SSP5-8.5 by 2030, and a tailings dam is designed for only 400 mm, failure could result in millions in damages and possible mine closure. Conversely, if the dam meets the design threshold, the VAR is zero.”
Step 5: Estimate financial impact
Here, dss+ proscribes the implementation of a second matrix. A five-by-five table, with a probability scale ranging from “possible to occur” to “multiple events at site”; and a scale of impact from “negligible” to “catastrophic” will again help to illustrate which areas need to serve as a top priority. This should include serious injury and fatality (SIF) risks, as incorporating them into the risk matrix ensures decisions reflect both financial and human exposure, creating a more complete picture of organisational vulnerability.
“Climate change alters the company’s operational risk and SIF profile,” argue the experts. “Some climate related hazards increase the likelihood or severity of existing SIF risks – for example, extreme heat elevates risks during confined space entry, hot work, and heavy manual handling; high winds increase the danger of working at height or crane operations; heavy rainfall and flooding complicate vehicle movements, electrical work, and emergency access.”
Step 6: Adaptation options
With risks evaluated and priorities drawn up, the sixth step is the one where companies should begin weighing up their options for change. Targeting the highest value at risk first, clients and stakeholders should be invited to contribute to find first solutions, to bolster both practicalities and buy-in. As with any transformation, identifying quick wins to help build early momentum is key – including early warning systems, emergency response plans, and insurance coverage – before moving to more capital intensive changes.
dss+ notes, “Importantly, this step is about creating a full “wish list” of potential actions, regardless of cost or complexity, to ensure no viable measure is overlooked. This comprehensive view enables informed prioritisation in the next phase, balancing risk reduction with cost-effectiveness.”
Step 7: Ensure a marginal cost curve
To provide a clear visual for prioritisation, as well as to help executives understand the costing of each action, dss+ recommends creating a marginal adaptation cost curve (MACC). Ranking each measure needed for a company’s mastering of climate risk management, it weighs their cost, against the value at risk they preserve – and subsequently illustrate their cost-effectiveness, even if they seem expensive.
The experts add, “The Adaptation MACC considers the entire value chain, not just individual sites, and accounts for multiple options addressing the same vulnerability. Each measure modifies the damage function for that vulnerability, and this reduction in VAR - combined with cost – is what the curve captures. The result is a practical tool for decision-makers to identify the most cost effective interventions that deliver the greatest risk reduction.”
Step 8: Draw up adaptation roadmap
These visualisations will enable the organisation to translate the core concepts into a practical, prioritised adaptation roadmap. This roadmap will weigh technical feasibility, cost, social impacts, and institutional capacity up, using multi-criteria decision analysis (MCDA) to balance trade-offs and set clear implementation milestones. The result should be a plan which yields quick wins for momentum, but also safeguards crucial assets first, and immediately sees a return on investment from value at risk being decreased.
According to the authors, “Most adaptation efforts fail not because the risks or solutions are unclear, but because organisations lack the governance, capabilities, or processes to execute them. Using insights gathered through steps one to seven, we assess organisational readiness to implement the roadmap across four pillars: mindset and behaviours, governance and management processes, capabilities and competencies, and enabling technologies. This allows us to define the organisational conditions required for success and design targeted interventions.”
Step 9: Financing the changes
A company can only commit to change as quickly as it can afford to invest in them. Financing climate risk reduction management will determine the pace and scale at which climate risks can be reduced; again enabling companies to prioritise the highest-impact, lowest-cost interventions. dss+ highlights two potential paths here: self-funding, where adaptation measures are integrated into capital allocation frameworks and compete for investment on the basis of risk reduction and economic return; or climate finance, where a company leverages external funding sources such as concessional loans, grants, blended finance mechanisms, and resilience bonds.
“When used effectively, climate finance not only lowers the cost of adaptation but also de-risks investments and enables more ambitious or capital-intensive resilience measures,” the experts explain. “Together, these pathways allow organisations to match financing options to risk priorities, ensuring that high-value adaptation measures are both economically justified and financially feasible.”
Step 10: Programme management
Finally, dss+ warns that firms do not see climate risk management as a one-and-done deal. Instead, the 10th step is to begin considering it as a continuous improvement programme, to be revisited and honed constantly. Similar to a company’s pathways toward net-zero, success requires embedding resilience into the organisation through mindset and behaviours, governance structures, management processes, capabilities, and enabling technologies.
The dss+ paper concludes, “Companies that succeed establish a cross functional project management office to monitor progress and lift roadblocks that are bound to appear along the way, while ensuring their organisational key success factors are implemented in parallel to technical solutions, with a continuous improvement mindset to gradually increase their maturity and the level of integration into standard processes. We can support organisations through the training and coaching of key personnel to ensure they understand and fulfil their new responsibilities.”
