Are Company Directors Creating Personal Liability?

feature image

Will shareholders in the future sue directors for failing to use and act upon reliable climate risk data available today? The same question can be asked of auditors.

EWNThe flooding in Central and Northern Australia is leading to food and supply shortages. A quick analysis of the physical climate risk posed to this region reveals a threat which was predictable. This isn’t a black swan event; it is a risk which can be quantified and mitigated against. The data exists for businesses to take defensible actions based on likelihood and severity with high spatial resolution and confidence. This is the very risk I imagine shareholders would like to know, especially if operations, assets, capital and cashflow are degraded.

 

Video: ABC News (Australia)

This begs the question. Are businesses and government suffering from target fixation? The desire to meet climate disclosure requirements, especially around the 2050 and 2090 timeframe, is blinding them to threats immediately in front of them. I would argue with respect to physical climate risk, the most important years are the next 15 to 20. Beyond this period, changes in technology, energy, the economy and geo-politics could easily make any expenditure today misguided.  Aside from very large works such as establishing a new mine, there are few businesses that could look past this investment horizon.

Video: Guardian Australia

While existing Board members and management will likely be long gone before 2050/90, they will be liable for what happens in the next 10 to 20 years. Indeed, for preventable events today and tomorrow. If real data (not synthetic modelling), isn’t being used, I can envision shareholders in the future looking to legal recourse against companies and directors.

How is this liability being realised? The answer is target fixation, a real-world problem. I believe this is a significant contributor to businesses and government being blinded to real world threats.  What is target fixation? This is a common military hazard associated with strafing runs during ground support missions. The pilot is so fixated on his run toward the objective that he fails to pull out in time, pulling up too late or not at all.  Similarly, the fixation by a business on a 2050 target, risks being unprepared for an entirely foreseeable emergency today or tomorrow.

Taking Action Today 

When it comes to mitigating the impact of climate risk, the next 10 to 15 years will be critical. The Early Warning Network features a team with expertise in meteorology, climate intelligence and spatial risk, offering round-the-clock monitoring of weather risks for our clients, and our staff are ready to provide the insightful data necessary for organisations to make informed decisions about operations in this 10 to 15 year time period. 

To discuss how we can help your business call (02) 6674 5717, email support@ewn.com.au, or contact us via our enquiry page here.

Share this blog

Related Posts