Reef Grief Relief
From the People, Planet, Profits & Projects Blog
by Richard Maltzman,
Dave Shirley
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Dave Shirley
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Date
I like to say that the ‘animator’ of projects is risk. Without risk, projects would just be ‘deliverable factories’. Where’s the fun in that? Also – as project managers, we earn our pay by dealing with uncertainty that comes naturally with projects, due to their cute uniqueness.
I know... sometimes risk is not cute. In fact, it can be deadly. Imagine a category 5 hurricane. Deadly.
Remember, though, that risk – by definition – can be threat OR opportunity.
“An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.”
In this post we’re going to talk about something that sits at the intersection of risk management and sustainability – and a way that a company has turned a threat into an opportunity – an opportunity that could provide both economic and ecological benefit.
I think that means it’s worth reading on, right? Yes.
The article, from Bloomberg News, is called Coral Reef Gets An Insurance Policy Of Its Own.
It discusses an insurance company, Swiss Re AG, which is currently writing a policy for a stretch of the Mesoamerican Reef in Mexico (see red areas in map below). Here you have an insurer covering a natural structure. The actual policyholders will be the beachfront hotels protected by that reef.
If you recall from the PMBOK® Guide, risk transfer is one of the seven ways we can respond to risk – and one of the four ways we can respond to threat. In this case we are talking about the threat of natural disaster (i.e. tropical storms and hurricanes). What shape does risk transfer usually take? Insurance.
Who normally covers (provides insurance for) damage from natural disasters? The government. The numbers are huge. The U.S. government spent at least $278 billion on disaster assistance between 2005 and 2014. The U.S. GAO (Government Accountability Office) says that climate change as one of the most significant financial risks to the federal government. This is one of the reasons that I think government can make a great rationale for investing in reducing climate change – a preventive approach. But I digress.
From the article:
Insurance groups have long urged governments to address climate change—the companies are, after all, at risk for big disaster payouts. But the Mexican example shows that risks can also be a business opportunity.
The Nature Conservancy has proposed a different approach: The extra money paid by the hotel owners to the government could be converted into premium payments to Swiss Re to cover the reef. The policy would be what’s called parametric insurance, in which a large hurricane would trigger near-immediate payouts. By having the money arrive quickly, reef repairs could begin sooner.
More about Parametric Insurance here.
Is this a Mexican thing? Is it limited to one country or region? Again, from the article:
The approach planned in Mexico can be expanded to other countries, says Kathy Baughman McLeod, the Nature Conservancy’s managing director for coastal risk and investment. She says at least 26 countries around the world are both protected by and economically dependent on coral reefs. The model could also be used for other publicly owned features that shield coastlines from storms, such as mangrove forests and coastal wetlands. The Nature Conservancy was one of the sponsors of a July conference of the International Insurance Society in London, which focused on the potential for insurers to augment governments in protecting against extreme weather.
What do you think? Is this a good example of People, Planet, Projects, and Profits? We think so. Launching this new type of insurance is a project, as would be any physical projects to protect the reef. It all comes together.
Posted
by
Richard Maltzman
on: August 01, 2017 10:14 PM |
Permalink
Comments (6)
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Vincent Guerard
Coach - Trainer - Speaker - Advisor| Freelance
Mont-Royal, Quebec, Canada
Very good thank.
That is good for natural events, such has tornados, hurricanes.
I would add that in other case I would add ethics, that is driver for sustainability.
Good idea to transfer hotel payments from government to insurers, but then why can't the government just do that on their behalf,
Stéphane Parent
Self Employed / Semi-retired| Leader Maker
Prince Edward Island, Canada
I also had that thought, Sante. I believe going directly to the hotels, and taking the government out of the middle, allows for quicker turnarounds are more effective responses.
Rami Kaibni
Community Champion
Senior Projects Manager | Field & Marten Associates
New Westminster, British Columbia, Canada
Interesting - Great subject title as well.
Risk Mitigation for natural disaster - intriguing to see Project Management principles expanding into this arena.
Very interesting topic Richard, i like it, thanks
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Very funny, Scotty. Now beam down my clothes.
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