Risk involves…

…the possibility of

loss.

Speculative Risk: Possibility of both gain or loss.

Pure Risk: Only the possibility of loss.

Traditional risks are those dangers we

associate with everyday life – house fires,

automobile accidents, health injuries, etc. –

for which standard insurance exists.

LEED professionals need to

pay attention to enterprise risk,

or the risks associated with

their specific industry.

Insurance companies operate by:

(a) Understanding the probability of each loss based on big data and statistical analysis

(b) Leveraging those statistics to their advantage by having so many paying policies, only a few of which will actually result in loss claims

Unfortunately, conventional probability

models are failing to stay up to date with

new risks and exposures, especially those

related to enterprise risk, climate change

and green building.

First, some insurance companies are failing

to adjust their statistical models to account

for increased risks associated with extreme

weather.

A report by CoreLogic found that 6.5 million homes

along the U.S. Atlantic & Gulf Coasts are at risk of

storm inundation, representing a potential $1.5 trillion

in reconstruction costs.

Yet a late 2014 study by Ceres.org of 330 insurers

cited “a profound lack of preparedness” on the matter.

The Consequence?

Families, businesses, the government, our

investments and the economy may suffer from

gross financial losses that could have been

mitigated, at least in part, with better preparation

and understanding of Sustainability Risk

Management.

Second, LEED certified and green building

owners still have a limited selection of green

insurance plans and insurers to choose

from.

This means that appropriately insuring a

green property investment (or filing a green

loss claim) is a challenge as many insurers

do not have the appropriate training to

understand green adjustments and

reconstruction costs.

But wait, there’s more!

As a LEED

professional, you need

to be especially

considerate of

Sustainability Risk

Management.

Here are just a few of your

considerations…

• Certification Risk: A binding promise of green

building certification is made, but the finished

project does not attain such certification.

• Construction Risk: In addition to standard

construction hazards, green projects face

risks associated with waste removal &

recycling, timeline delays from specialty

product procurement, and costs of

substitution for niche green experts.

And a few more…

• Promise of Performance Risk: A certain level of improved energy efficiency or other green metric is guaranteed, but subsequently unmet.

• Standard of Care Risk: The nature of green investments over standard building projects implies a higher standard of care taken by the designers, architects, & builders, but unless expectations between all parties are managed effectively, subsequent disagreement over professional liability is possible.

In addition to those mentioned, LEED

professionals need to manage other risks by

identifying weaknesses & potential exposures

specific to their field & business.

This is done by by laying out your processes,

including your supply chain, & conducting a

thorough SWOT analysis.

Ask yourself:

Where might my firm

and/or I be exposed to

either internal or external

hazards?

Commissioning as Mitigation

Transparency is key to managing expectations and

processes, but assigning a third party validation

party is one of the most rational (and required with

LEED) risk mitigation tactics.

Commissioning creates a process of checks and

balances across all parties for the entirety of the

project, thereby improving project performance

and managing risk.

What Other Risk Mitigation

Strategies Should I Use?

Sustainability Risk Management offers a

framework for:

• Insurance concepts

• Coverage types

• Green building development

• Strategy for reducing insurance premiums

through sustainable business practices