Mainstreaming climate change adaptation : An incremental approach to disaster risk management in Australia

In this paper we argue that rationalist ‘predict then act’ approaches to disaster risk management (DRM) policy promote unrealistic public expectations of DRM provisions, the avoidance of decision making by political elites, an over-reliance on technical expertise and engineering solutions to reducing exposure to natural events, and a reactive approach to DRM overall. We propose an alternative incrementalist approach that focuses on managing uncertainties rather than reducing them and building resilience not simply through the reduction of hazard exposure, but also through the ongoing reduction of community vulnerability, the explicit consideration of normative priorities, and more effective community engagement in climate risk debates.

Rethinking disaster risk management and climate change adaptation

Australian governments face the twin challenges of dealing with extreme weather-related disasters (such as floods and bushfires) and adapting to the impacts of climate change. These challenges are connected, so any response would benefit from a more integrated approach across and between the different levels of government.This report summarises the findings of an NCCARF-funded project that addresses this problem. The project undertook a three-way comparative case study of the 2009 Victorian bushfires, the 2011 Perth Hills bushfires, and the 2011 Brisbane floods. It collected data from the official inquiry reports into each of these events, and conducted new interviews and workshops with key stakeholders. The findings of this project included recommendations that range from the conceptual to the practical. First, it was argued that a reconceptualization of terms such as ‘community’ and ‘resilience’ was necessary to allow for more tailored responses to varying circumstances. Second, it was suggested that the high level of uncertainty inherent in disaster risk management and climate change adaptation requires a more iterative approach to policymaking and planning. Third, some specific institutional reforms were proposed that included: 1) a new funding mechanism that would encourage collaboration between and across different levels of government, as well as promoting partnerships with business and the community; 2) improving community engagement through new resilience grants run by local councils; 3) embedding climate change researchers within disaster risk management agencies to promote institutional learning, and; 4) creating an inter-agency network that encourages collaboration between organisations.

The challenge of integrating climate change adaptation and disaster risk management : lessons from bushfire and flood inquiries in an Australian context

Emergency management and climate change adaptation will increasingly challenge all levels of government because of three main factors. First, Australia is extremely vulnerable to the impacts of climate change, particularly through the increasing frequency, duration and/or intensity of disasters such as floods and bushfires. Second, the system of government that divides powers by function and level can often act as a barrier to a well-integrated response. Third, policymaking processes struggle to cope with such complex inter-jurisdictional issues. This paper discusses these factors and explores the nature of the challenge for Australian governments. Investigations into the 2009 Victorian bushfires, the 2011 Perth Hills bushfires, and the 2011 Brisbane floods offer an indication of the challenges ahead and it is argued that there is a need to: improve community engagement and communication; refocus attention on resilience; improve interagency communication and collaboration; and, develop institutional arrangements that support continual improvement and policy learning. These findings offer an opportunity for improving responses as well as a starting point for integrating disaster risk management and climate change adaptation policies. The paper is based on the preliminary findings of an NCCARF funded research project: The Right Tool for the Job: Achieving climate change adaptation outcomes through improved disaster management policies, planning and risk management strategies involving Griffith University and RMIT. It should be noted from the outset that the purpose of this research project is not to criticise the actions of emergency service workers and volunteers who do an incredible job under extreme circumstances, often risking their own lives in the process. The aim is simply to offer emergency management agencies the opportunity to step back and rethink their overall approach to the challenge they face in the light of the impacts of climate change.

Public policy, disaster risk management and climate change adaptation

Public policymakers are caught in a dilemma : there is a growing list of urgent issues to address, at the same time that public expenditure is being cut. Adding to this dilemma is a system of government designed in the 19th century and competing theories of policymaking dating back to the 1950s. The interlinked problems of disaster risk management and climate change adaptation are cases in point. As the climate changes, there will be more frequent, intense and/or prolonged disasters such as floods and bushfires. Clearly a well integrated whole of government response is needed, but how might this be achieved? Further, how could academic research contribute to resolving this dilemma in a way that would produce something of theoretical interest as well as practical outcomes for policymakers? These are the questions addressed by our research via a comparative analysis of the 2009 Victorian bushfires, the 2011 Perth Hills bushfires, and the 2011 Brisbane floods. Our findings suggest that there is a need to: improve community engagement and communication; refocus attention on resilience; improve interagency communication and collaboration; and, develop institutional arrangements that support continual improvement and policy learning. These findings have implications for all areas of public policy theory and practice.

Towards networked governance : improving interagency communication and collaboration for disaster risk management and climate change adaptation in Australia

Major disasters, such as bushfires or floods, place significant stress on scarce public resources. Climate change is likely to exacerbate this stress. An integrated approach to disaster risk management (DRM) and climate change adaptation (CCA) could reduce the stress by encouraging the more efficient use of pooled resources and expertise. A comparative analysis of three extreme climate-related events that occurred in Australia between 2009 and 2011 indicated that a strategy to improve interagency communication and collaboration would be a key factor in this type of policy/planning integration. These findings are in accord with the concepts of Joined-up Government and Network Governance. Five key reforms are proposed: developing a shared policy vision; adopting multi-level planning; integrating legislation; networking organisations; and establishing cooperative funding. These reforms are examined with reference to the related research literature in order to identify potential problems associated with their implementation. The findings are relevant for public policy generally but are particularly useful for CCA and DRM.

Internal audit involvement in enterprise risk management

Purpose The paper examines the impact of internal auditors’ involvement in Enterprise Risk Management (ERM) on perceptions of their willingness to report a breakdown in risk procedures and whether a strong relationship with the audit committee affects such willingness to report. The study also investigates the use of ERM and the role of internal audit in ERM in Australian private and public sector entities. Design/methodology/approach The study uses an experimental design, manipulating (i) the internal auditor’s involvement in ERM and (ii) the strength of the relationship between internal audit and the audit committee. Participants are 117 certified internal auditors. The study also gathers descriptive data on the use of ERM. Findings The study indicates that a high involvement in ERM impacts the perceptions of internal auditors’ willingness to report a breakdown in risk procedures to the audit committee. However, a strong relationship with the audit committee does not appear to affect their perceived willingness to report. The study also finds that the majority of organisations have recently adopted ERM. Internal auditors are involved in ERM assurance activities but some also engage in activities that could compromise objectivity.

Analysis of risk management disclosures by Australian publicly listed companies

In the aftermath of the global financial crisis, effective risk management (RM) and its communication to stakeholders are now considered essential components in corporate governance. However, despite the importance of RM communication, it is still unclear how and to what extent disclosures in financial reports can achieve effective communication of RM activities. The situation is hampered by the paucity of international RM Research that captures institution differences in corporate governance standards. The Australian setting provides an ideal environment in which to examine RM communication because the Australian Securities Exchange (ASX) has since 2007 recommended RM disclosures under its principle-based governance rules. The recommendations are contained in Principle 7 of the Corporate Governance Principles and recommendations (ASX CGPR). Accordingly, to assess the effectiveness of the AXS's RM governance principle, this study examines the nature and extent of RM disclosures reported by major ASX-listed firms. Using a mixed method approach (thematic content analysis and a series of regression analysis) we find widespread divergence in disclosure practices and low conformance with the Principle 7 recommendations. Certain corporate governance mechanisms appear to influence some categories of RM dislcosure but equity risk has surprisingly little explanatory power. These results suggest that the RM disclosures practices observed in the Australian setting may not be meeting the objectives of regulators and the needs of stakeholders.

Spontaneous and episodic volunteers: The legislative, insurance and risk management framework

Baby Boomers are a generation of life long association joiners, but following generations prefer spontaneous and episodic volunteering. This trend is apparent not only during natural disasters, but in most other spheres of volunteering. Legal liability for such volunteers is a growing concern, which unresolved, may dampen civic participation. We critically examine the current treatment of these liabilities through legislation, insurance and risk management.

Risk management strategies using seasonal climate forecasting in irrigated cotton production: a tale of stochastic dominance.

Decision-making in agriculture is carried out in an uncertain environment with farmers often seeking information to reduce risk. As a result of the extreme variability of rainfall and stream-flows in north-eastern Australia, water supplies for irrigated agriculture are a limiting factor and a source of risk. The present study examined the use of seasonal climate forecasting (SCF) when calculating planting areas for irrigated cotton in the northern Murray Darling Basin. Results show that minimising risk by adjusting plant areas in response to SCF can lead to significant gains in gross margin returns. However, how farmers respond to SCF is dependent on several other factors including irrigators’ attitude towards risk.

An analysis of risk management disclosures: Australian evidence

- Purpose Communication of risk management practices are a critical component of good corporate governance. Research to date has been of little benefit in informing regulators internationally. This paper seeks to contribute to the literature by investigating how listed Australian companies in a setting where disclosures are explicitly required by the ASX corporate governance framework, disclose risk management (RM) information in the corporate governance statements within annual reports. - Design/methodology/approach To address our study’s research questions and related hypotheses, we examine the top 300 ASX-listed companies by market capitalisation at 30 June 2010. For these firms, we identify, code and categorise RM disclosures made in the annual reports according to the disclosure categories specified in Australian Stock Exchange Corporate Governance Principles and Recommendations (ASX CGPR). The derived data is then examined using a comprehensive approach comprising thematic content analysis and regression analysis. - Findings The results indicate widespread divergence in disclosure practices and low conformance with the Principle 7 of the ASX CGPR. This result suggests that companies are not disclosing all ‘material business risks’ possibly due to ignorance at the board level, or due to the intentional withholding of sensitive information from financial statement users. The findings also show mixed results across the factors expected to influence disclosure behaviour. Notably, the presence of a risk committee (RC) (in particular, a standalone RC) and technology committee (TC) are found to be associated with improved levels of disclosure. we do not find evidence that company risk measures (as proxied by equity beta and the market-to-book ratio) are significantly associated with greater levels of RM disclosure. Also, contrary to common findings in the disclosure literature, factors such as board independence and expertise, audit committee independence, and the usage of a Big-4 auditor do not seem to impact the level of RM disclosure in the Australian context. - Research limitation/implications The study is limited by the sample and study period selection as the RM disclosures of only the largest (top 300) ASX firms are examined for the fiscal year 2010. Thus, the finding may not be generalisable to smaller firms, or earlier/later years. Also, the findings may have limited applicability in other jurisdictions with different regulatory environments. - Practical implications The study’s findings suggest that insufficient attention has been applied to RM disclosures by listed companies in Australia. These results suggest that the RM disclosures practices observed in the Australian setting may not be meeting the objectives of regulators and the needs of stakeholders. - Originality/value Despite the importance of risk management communication, it is unclear whether disclosures in annual financial reports achieve this communication. The Australian setting provides an ideal environment to examine the nature and extent of risk management communication as the Australian Securities Exchange (ASX) has recommended risk management disclosures follow Principle 7 of its principle-based governance rules since 2007.

The climate change risk management matrix for the grazing industry of northern Australia

The complexity, variability and vastness of the northern Australian rangelands make it difficult to assess the risks associated with climate change. In this paper we present a methodology to help industry and primary producers assess risks associated with climate change and to assess the effectiveness of adaptation options in managing those risks. Our assessment involved three steps. Initially, the impacts and adaptation responses were documented in matrices by ‘experts’ (rangeland and climate scientists). Then, a modified risk management framework was used to develop risk management matrices that identified important impacts, areas of greatest vulnerability (combination of potential impact and adaptive capacity) and priority areas for action at the industry level. The process was easy to implement and useful for arranging and analysing large amounts of information (both complex and interacting). Lastly, regional extension officers (after minimal ‘climate literacy’ training) could build on existing knowledge provided here and implement the risk management process in workshops with rangeland land managers. Their participation is likely to identify relevant and robust adaptive responses that are most likely to be included in regional and property management decisions. The process developed here for the grazing industry could be modified and used in other industries and sectors. By 2030, some areas of northern Australia will experience more droughts and lower summer rainfall. This poses a serious threat to the rangelands. Although the impacts and adaptive responses will vary between ecological and geographic systems, climate change is expected to have noticeable detrimental effects: reduced pasture growth and surface water availability; increased competition from woody vegetation; decreased production per head (beef and wool) and gross margin; and adverse impacts on biodiversity. Further research and development is needed to identify the most vulnerable regions, and to inform policy in time to facilitate transitional change and enable land managers to implement those changes.

Corporate philanthropy, reputation risk management and shareholder value: A study of Australian corporate giving

This study examines the role of corporate philanthropy in the management of reputation risk and shareholder value of the top 100 ASX listed Australian firms for the three years 2011-2013. The results of this study demonstrate the business case for corporate philanthropy and hence encourage corporate philanthropy by showing increasing firms’ investment in corporate giving as a percentage of profit before tax, increases the likelihood of an increase in shareholder value. However, the proviso is that firms must also manage their reputation risk at the same time. There is a negative association between corporate giving and shareholder value (Tobin’s Q) which is mitigated by firms’ management of reputation. The economic significance of this result is that for every cent in the dollar the firm spends on corporate giving, Tobin’s Q will decrease by 0.413%. In contrast, if the firm increase their reputation by 1 point then Tobin’s Q will increase by 0.267%. Consequently, the interaction of corporate giving and reputation risk management is positively associated with shareholder value. These results are robust while controlling for potential endogeneity and reverse causality. This paper assists both academics and practitioners by demonstrating that the benefits of corporate philanthropy extend beyond a gesture to improve reputation or an attempt to increase financial performance, to a direct collaboration between all the factors where the benefits far outweigh the costs.

Modeling and Forecasting Implied Volatility: Implications for Trading, Pricing, and Risk Management

Modeling and forecasting of implied volatility (IV) is important to both practitioners and academics, especially in trading, pricing, hedging, and risk management activities, all of which require an accurate volatility. However, it has become challenging since the 1987 stock market crash, as implied volatilities (IVs) recovered from stock index options present two patterns: volatility smirk(skew) and volatility term-structure, if the two are examined at the same time, presents a rich implied volatility surface (IVS). This implies that the assumptions behind the Black-Scholes (1973) model do not hold empirically, as asset prices are mostly influenced by many underlying risk factors. This thesis, consists of four essays, is modeling and forecasting implied volatility in the presence of options markets’ empirical regularities. The first essay is modeling the dynamics IVS, it extends the Dumas, Fleming and Whaley (DFW) (1998) framework; for instance, using moneyness in the implied forward price and OTM put-call options on the FTSE100 index, a nonlinear optimization is used to estimate different models and thereby produce rich, smooth IVSs. Here, the constant-volatility model fails to explain the variations in the rich IVS. Next, it is found that three factors can explain about 69-88% of the variance in the IVS. Of this, on average, 56% is explained by the level factor, 15% by the term-structure factor, and the additional 7% by the jump-fear factor. The second essay proposes a quantile regression model for modeling contemporaneous asymmetric return-volatility relationship, which is the generalization of Hibbert et al. (2008) model. The results show strong negative asymmetric return-volatility relationship at various quantiles of IV distributions, it is monotonically increasing when moving from the median quantile to the uppermost quantile (i.e., 95%); therefore, OLS underestimates this relationship at upper quantiles. Additionally, the asymmetric relationship is more pronounced with the smirk (skew) adjusted volatility index measure in comparison to the old volatility index measure. Nonetheless, the volatility indices are ranked in terms of asymmetric volatility as follows: VIX, VSTOXX, VDAX, and VXN. The third essay examines the information content of the new-VDAX volatility index to forecast daily Value-at-Risk (VaR) estimates and compares its VaR forecasts with the forecasts of the Filtered Historical Simulation and RiskMetrics. All daily VaR models are then backtested from 1992-2009 using unconditional, independence, conditional coverage, and quadratic-score tests. It is found that the VDAX subsumes almost all information required for the volatility of daily VaR forecasts for a portfolio of the DAX30 index; implied-VaR models outperform all other VaR models. The fourth essay models the risk factors driving the swaption IVs. It is found that three factors can explain 94-97% of the variation in each of the EUR, USD, and GBP swaption IVs. There are significant linkages across factors, and bi-directional causality is at work between the factors implied by EUR and USD swaption IVs. Furthermore, the factors implied by EUR and USD IVs respond to each others’ shocks; however, surprisingly, GBP does not affect them. Second, the string market model calibration results show it can efficiently reproduce (or forecast) the volatility surface for each of the swaptions markets.

Urban water supply and management

Population growth and rapid urbanization lead to considerable stress on already depleting water resources. A great challenge for water authorities of urban cities is to supply adequate and reliable safe water to all consumers. In most of the developing countries water scarcity and high demands have led the water authorities to resort to intermittent supplies. Surface and groundwater are the major sources of supply in urban cities. The direct consequences of intermittent supplies and poor sanitation practices are several incidences of water borne diseases posing public health risk. In order to minimize the supply-demand gap and to assure good quality of water, new techniques or models can be helpful to manage the water distribution systems (WDS) in a better way. In the present paper, a review is carried out on the existing urban water supply management methodologies with a way forward for the proper management of the water supply systems.