People, Planet, Profits & Projects

This is a story about risk response. And New Jersey. Let’s start with some definitions.

• The 6^th Edition of PMI’s PMBOK® Guide defines “Risk Avoidance” as ‘when the project team acts to eliminate the threat, or protect from its impact’.It involves ‘changing the plan or objective that is in jeopardy in order to eliminate the threat entirely’.
• They further describe “Risk Mitigation” as ‘action taken to reduce the probability of occurrence and/or impact of the threat’.
• Introduced in the 6^th Edition, “Overall” project risk is ‘the effect of uncertainty on the project as a whole, arising from all sources of uncertainty, including individual risks, representing exposure of stakeholders to the implications of variation of project outcome, both positive and negative’.For the purposes of this post, we can think of overall project risk as those that ‘sweep through’ the whole project.

In PMI terms, these are distinct and different ways of response strategies for threats.  In my graduate PM courses at Boston University, I teach (through examples) that in practice, a flowing minestrone soup of risk response – a mélange, a mixture, is often used, not distinct, staccato responses.

That’s the case with respect to the risk response to sea-level rise.  Whatever your feelings about climate change and its causes, the reality is that sea levels are rising and island nations and coastal communities are RIGHT NOW facing the threats of sea-level rise, and the flooding, erosion, and other effects that come along with it.  Sea-level rise is a fact, plain and simple.  This is void of politics, bias, or opinion.  Studies by the US military show the upcoming effects, of note, in this report.  You can see a video about sea-level rise based on that study in the video below.  In the video, the following sentence (aligned with this blog post!) is heard: “combinations of measures are more effective in reducing risk than reliance on a single solution”.  There it is: minestrone.

One very meaningful effect is the loss of property.  I called this blog post “Tame Abandon” – a sort of play on words from the expression ‘wild abandon’ (look it up).  This is about responding to threat by virtue of retreat – of abandonment, but in a way that is productive and is not admitting defeat, not at all.

A very interesting article from Scientific American, called “Underwater: Coastal communities struggling to adapt to rising seas are beginning to do what was once unthinkable – retreat”, caught my attention.  You should read this article as a citizen of Earth but also as a project manager.  Think about it from the perspective of risk response, from the perspective of PROGRAM management, because what you’ll learn if you read this is that risk response, in some cases, has taken on the form of new PROGRAMS which are a minestrone – a soup – of risk avoidance, risk mitigation, and overall risk management, as defined by PMI.

Here is an excellent video summary of the article (think of it as a motivation to read the article, not as a substitute for reading it!).

To summarize the article, which focuses mainly on the US state of New Jersey, the statistics are frightening.  250,000 homes, says the article, representing a total value of $108 billion, are at risk of chronic flooding within the next 30 years.  20 of 21 counties in the state have shorelines that are “tidally influenced” by sea-level rise.  Read more about that here, in an article from the State.  The article goes on to talk about the Blue Acres Buyout Program (note: PROGRAM) which has been put in place to avoid the threat to the homeowners in affected areas buy having them abandon their homes and to let the resulting land go ‘back to nature’.  This is the risk avoidance portion of the response.  By recovering this land, however, and letting it ‘recover’, it will help prevent future flooding.  This is the mitigation portion of the risk response.

If you happen to live in or near New Jersey and are curious about your own home, or have a relative there and want to check for them, there is a site that shows the situation by geography.  It’s called the NJ Flood Mapper: http://www.njfloodmapper.org/slr/.

Getting back to Scientific American - its article describes the story so well, it’s better if I don’t continue to summarize it - read it for yourself.   I hope that with this blog post, I’ve opened up your thinking to read it in a different way, under a project management lens.  It’s my hope that this is a mutually-beneficial lesson in that as a PM, we have much to offer the world in the way of project and program management of such risk responses, and that as you see the impact and effect of such things as sea-level rise, you gain a longer-term, more ‘benefits realization’ vision of project management.

In part 1 of “A Complex, Swirling Mess”, I introduced the ideas from a brief story from NPR (link to the broadcast and transcript repeated here for your convenience).  The story discussed how some companies are (in a valid, ethical way) profiting from the effects of climate change, by way of consulting and advising other organizations which need to deal NOW with changes that (whatever their cause) are going to happen in the next 1, 5, 10, 25, or 100 years.  For a short story (the audio is only 3.5 minutes long!) it sent me on a journey of discovery about the fascinating business of actuarial science (see Part 1) and how climate change, in the spirit of secondary risk, is opening an opportunity for some companies.

One of the companies featured in the story is Jupiter Intelligence. Jupiter is featured in this recent story from the Washington Post, entitled, “Climate change could put businesses underwater. Start-up firm Jupiter aims to come to the rescue”.

Before you read about Jupiter, take a look at this report, entitled Risky Business, sponsored by Co-Chairs: Michael R. Bloomberg, founder, Bloomberg Philanthropies; 108th Mayor of the City of New York; founder, Bloomberg L.P., Henry M. Paulson, Jr., Chairman of the Paulson Institute; former U.S. Secretary of the Treasury, and Thomas F. Steyer, retired founder, Farallon Capital Management LLC.  You can download the full report here. 

The key paragraph in the Washington Post story is:

“This week, a high-powered, well-funded start-up company has barged onto the scene to help businesses and governments confront their increasing vulnerability to climate change and weather disasters. Using cutting edge technology, it could revolutionize how they receive information about weather and climate threats and make critical planning decisions.

Known as Jupiter, the company was founded in 2017 by Rich Sorkin, a serial entrepreneur who has worked with Steve Jobs, Bill Gates, and Elon Musk. Sorkin was Musk’s first boss as chief executive of Zip2, a company that provided business directories to online newspapers in the late 1990s.”

If you go to the “Team” page of Jupiter Intelligence you will see that they have hired many top experts in the area of climate science.  Many of these have become available as the ‘difference in philosophy’ between the Obama and Trump administrations about climate change and science in general has become apparent.

The demand is there.  A recent article in Nature describes “The Rise of Demand-Driven Climate Services”.  It’s important to note that this is different – very different – from weather forecasting.  This is about climate – sweeping, significant, impactful change over longer periods of time.

Jupiter offers tools that predict the impact of climate-related incidents in a specific place and accounting for very local issues, Including FloodScore™ and HeatScore™.  They’re built on a platform called ClimateScore™ which “leverages cloud computing to run and link multiple prediction models that ingest data from millions of ground-based and satellite sensors”.

“FloodScore and HeatScore predict not only precipitation and temperature changes, but also simulate their interactions with the built environment and the surrounding landscape and how they’re altered by climate change. In the assessing flood risk in New Orleans, for example, the analytical framework would take into account the convergence of wetlands and concrete and sea level rise”, says Richard Sorkin, the Founder of Jupiter Intelligence.

Below is an example output of one of the analyses for flooding potential in New York City.

Jupiter is also featured in this article from The New York Times.  In it, a key extract is:

As global warming advances, experts say that governments will ultimately have to invest more in their own local climate prediction tools to help cities and industries adapt. But they also see a role for private climate forecasters, much as weather companies have sprung up to supplement the work the National Weather Service does.

“The federal government could be doing a lot more,” said James L. Buizer, who studies climate adaptation at the University of Arizona. “But there’s still an important role for the private sector. If companies are going to benefit from this information, they ought to be paying for it. After all, it’s their infrastructure that’s going to get trashed.”

That private sector, exemplified by Jupiter Intelligence, has a chance to turn a profit on climate change.  As they do so, it also may bring more attention to the issue, but the point here is that – like project managers - long-term planners are best off making decisions from solid data, based in science, and that’s what Jupiter and others such as Coastal Risk are aiming to provide.

Of course, you can read more about Jupiter or Coastal Risk on their websites.

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.