Extreme weather events, as highlighted by the Global Risks Report of 2024 from the World Economic Forum, pose significant threats to businesses and enterprises worldwide. This risk is ranked 1st in the 10-year-horizon survey and ranked 2nd in the 2-year-horizon survey in the Report. More insights about the results in these two surveys can be found in our previous blog articles WEF2024 Top Risks: 2-year Horizon and WEF 2024Top Risks: 10-year Horizon.
These events encompass a wide range of phenomena, including hurricanes, floods, droughts, wildfires, heatwaves, and storms. They can have devastating consequences for various industries, affecting operations, supply chains, infrastructure, and financial stability. Climate Council reported that, in April, extreme heat disrupted daily life in the Philippines, Thailand, Bangladesh, and India. In the Philippines, in-person classes were suspended, and in Thailand, 30 people died from heatstroke. India experienced record-breaking temperatures, affecting voter turnout during the national elections.
In the agriculture sector, severe weather events such as droughts and floods can lead to crop failures, reduced yields, and disrupted supply chains. This can result in food shortages, price fluctuations, and financial losses for farmers, food producers, and retailers. Additionally, adverse weather can impact the availability and quality of water resources, affecting industries reliant on water for manufacturing processes, energy production, and operations.
Infrastructure and transportation industries are vulnerable to unusual weather patterns that damage roads, bridges, railways, ports, and airports. Disruptions in transportation networks can hinder the movement of goods and people, leading to delays, logistical challenges, and increased costs for businesses involved in trade and commerce. Moreover, infrastructure damage can pose safety risks and compromise the resilience of communities and economies.
The tourism and hospitality sectors are also susceptible to unusual climatic patterns, which can disrupt travel plans, damage tourist destinations, and impact visitor numbers. Hurricanes, storms, and wildfires can cause property damage, evacuation orders, and cancellations of events and bookings, resulting in revenue losses for hotels, airlines, tour operators, and local businesses reliant on tourism.
To address the risks associated with hazardous weather conditions, businesses can adopt proactive strategies to enhance resilience and minimize disruption. Implementing the following measures can help mitigate the impact of these events:
Perform thorough risk assessments to find weaknesses, understand possible impacts, and create backup plans for adverse weather. This involves checking how well infrastructure, supply chains, and important assets can handle different weather dangers.
Invest in resilient infrastructure and building designs that can withstand challenging weather conditions, such as reinforced structures, flood barriers, and storm water management systems. Incorporate climate resilience considerations into urban planning and development projects to reduce the risk of damage from severe weather events.
Diversify supply chains and sourcing strategies to minimize dependency on single suppliers or regions prone to adverse weather risks. Establish alternative production sites, distribution channels, and logistics networks to mitigate disruptions caused by weather-related disasters.
Obtain adequate insurance coverage, including property, business interruption, and natural disaster insurance, to mitigate financial losses resulting from severe weather events. Explore risk transfer mechanisms such as catastrophe bonds, parametric insurance, and weather derivatives to transfer risks to the financial markets.
Collaborate with government agencies, local communities, industry associations, and other stakeholders to enhance resilience and preparedness for extreme climatic conditions. Participate in public-private partnerships, community resilience initiatives, and climate adaptation programs to build collective resilience and address shared risks.
By implementing proactive measures and adaptive strategies, businesses and enterprises can enhance their business resilience to harsh weather events, protect their assets and operations, and safeguard their long-term sustainability in an era of climate uncertainty.
ICA supports businesses in building resilience and ensuring continuity in the face of unpredictable weather challenges. Contact us today. Our experts are ready to help you in navigating and mitigating risks to protect your business operations.
