Australia faced numerous natural catastrophe events in the first half of 2024 (Figure 1):
Source : WTW Research Network
While these events did not result in significant economic damage, they have highlighted the natural catastrophe risks that Australia faces, which are expected to escalate with climate change. The Intergovernmental Panel on Climate Change (IPCC) projects that climate change will increase the frequency and/or intensity of extreme weather events in Australia, [2] such as bushfires, floods and tropical cyclones, leading to heavier rainfall, stronger winds and longer wildfire seasons (Table 1). For example, events such as the flash flooding in April — historically mostly confined to coastal regions — are becoming more common farther inland as global warming is influencing the climate drivers that determine the frequency and location of extreme precipitation.[1]
| Peril | Direction of change | Projected impacts | |
|---|---|---|---|
| Bushfires | Increase in bushfires |  |
Bushfires in Australia are projected to increase in frequency, severity and duration, particularly in southern and eastern Australia. This is primarily due to increasing mean temperature and cool season rainfall decline. |
| Tropical cyclones | Decrease in number of tropical cyclones Increase in the proportion of severe tropical cyclones |
|
Fewer tropical cyclones are expected, but a greater proportion of them will be severe. |
| Severe convective storms | Changes uncertain |  |
Future projections for lightning, hail, tornadoes and extreme wind gusts are uncertain. Long-term highquality observations are lacking, and climate models are unable to simulate these small-scale phenomena. |
| Flooding | Increase in flash flooding Increase in river flooding |
|
More intense extreme rainfall events are expected, leading to increased flash flooding, especially in northern Australia. Smaller increases may occur in southern Australia, where drier antecedent conditions may lead to less surface runoff. Rainfall totals from east coast lows and tropical systems are expected to increase, leading to increased flood risk in the larger river catchments. |
Natural catastrophes such as these can disrupt critical infrastructure and business value chains in a variety of complex and interconnected ways. Using “storylines” — physically consistent narratives of plausible future events — helps us understand and manage these complex risks in a warming world. For instance, a storyline could depict a future where prolonged droughts lead to severe water shortages, increasing business costs and downtime — underscoring the need for effective water management strategies. These narratives are oriented around events that people can easily understand and relate to and allow us to clearly communicate which aspects we are more or less confident in (known as “partitioning uncertainty”).
WTW works closely with companies in the region to translate the latest climate and impact science into information that can be used to make business decisions. This includes the use of storylines that integrate climate model outputs, observational data and expert judgment to create extreme but plausible scenarios. These can guide new or upgraded risk management controls — usually in the context of a wider Enterprise Risk Management (ERM) framework.
A storyline approach is particularly useful for two types of risks:
Consider road freight worker health and safety, an important issue for many companies. In Australia, strong winds and bushfires have contributed to serious incidents in the past.[3] [4] A company might want to understand future climate impacts on worker or contractor safety to improve controls or business continuity plans. Conventional climate models — even locally downscaled — cannot provide these answers directly, but storylines, based on diverse information sources, can.
Key information sources for assessing bushfire risks in this context include:
An expert panel can then deliberate on this information in a structured manner.[6] Scores can be considered around the likelihood of a scenario occurring (noting that a likelihood score is not always needed in a storylines approach). Importantly, a confidence score can be given, which reflects the experts’ level of agreement, together with the amount and quality of the available evidence.[7]
Traditional risk assessments track individual threats by identifying historical trends in the magnitude and frequency of single hazards; however, this approach does not capture the risk from interconnected and cascading hazards, which have the potential to amplify risks for a company’s value chain. The resulting compound risks differ significantly from independent risks, often with distinct likelihoods and impacts.[8] [9]
The floods, tropical cyclones, convective storms and bushfires experienced in Australia during the first half of 2024 exemplify how hazards can strike in quick succession, creating transport delays, power cuts and critical supply shortages as well as affecting worker availability and safety.
A storyline approach views risks through the lens of the entire value chain, identifying interactions and compounding effects, which add up to something greater. Analyzing factors that could produce a significant shock event can inform shorter-term business continuity plans and longer-term strategic decisions such as mergers and acquisitions.
In the face of global change, there has never been a more important time to consider complex and compounding risks and their impact on a company’s short-term performance and long-term prosperity.
