It might surprise some to see “extreme weather” rise to the top of a long list of global risks cited in the World Economic Forum's Global Risks Report 2017. This could be because news headlines of the past year have been dominated by politics in the United States and abroad.
However, taking a longer view of the risks that have affected businesses worldwide and will continue to have an impact in the years to come, it’s not surprising that extreme weather is leading the pack.
For the first time in 12 years, extreme weather was identified in the Report as the top risk in terms of likelihood. This is according to the results of the Global Risk Perception Survey, in which 750 members of the WEF’s global multi-stakeholder community were asked to consider 30 global risks categorized as societal, technological, economic, environmental or geopolitical over a 10-year time horizon.
Extreme weather was named the second biggest risk in terms of impact over the next 10 years, and other environmental risks (major natural disasters, water crises and failure of climate-change mitigation and adaption) dominated the survey results.
The Washington Post, in recapping last year’s 10 most extreme weather events in the United States, dubbed 2016 “the year of the flood.” Indeed it was. From Hurricane Matthew to flooding in Louisiana, West Virginia, Houston and Maryland, dry land was under siege in 2016. Florida wasn’t spared, as the Sunshine State was hit by Hurricane Hermine—the first hurricane to make landfall there in 11 years.
An East Coast blizzard and a Texas hailstorm were reminders that excess water can come in different forms and wreak costly damage. But where there seemed to be too much water in many parts of the country, there was too little in the Southeast, which led to wildfires in the region, particularly in eastern Tennessee. Bear in mind that The Washington Post’s list did not consider weather events in Canada, where the Fort McMurray wildfire in Alberta last year burned more than 1.5 million acres and destroyed more than 2,400 homes and buildings.
Planning for impact and recovery
Climate volatility is not going away. In fact, studies show that extreme weather events are on the rise globally.
In addition to increased weather volatility, there has been significant development along the Atlantic and Gulf coasts in the last decade. Some fear that many coastal residents and business owners may not be prepared for a major hurricane strike because of “hurricane amnesia.”
Businesses, in particular, need to be concerned about how an extreme weather event could impact not only their physical assets, but also their employees’ homes, their communications systems and their supply chains—both for parts and supplies needed to produce goods and services and for products that need to be delivered to retailers and customers.
Adverse weather remains a major contributor to supply chain interruptions. As supply chains have become longer and more complex, the opportunity for failure at any critical point is greater than ever. Companies tend to lack the detailed information needed to assess supply chain risk. Companies can capitalize on opportunities by building supply chain resilience, which involves business continuity planning, physical loss prevention and insurance to fund the post-event mitigation. There is a tongue-in-cheek saying that, “everybody talks about the weather, but nobody does anything about it.” The truth is that business leaders can do something about how extreme weather risks will impact their businesses and can build resilience in the face of such events.
An effective emergency response plan will address actions to take before and immediately after an event in order to help preserve property and return critical operations to a minimum level. Businesses also need to develop a business continuity and recovery plan that can help put the business in a position to operate and sustain a long-term recovery.
At Zurich, we help customers mitigate the risks and understand the opportunities associated with extreme weather and other environmental challenges. This includes placing more emphasis on risk reduction, preparedness and resilience, in addition to recovery and rebuilding.