3 Ways Climate Change Increases Enterprise Risk

The Resilient Enterprise | The riskmethods Blog
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The US government’s 2018 national climate report contains bad news for the planet, and for all the organizations that operate on it. What do the consequences of climate change mean for enterprises across the globe? What new problems should they anticipate, and how should they should start making attempts to mitigate them?

by Jason Miller

The research around climate change has shown some alarming trends over the past years. Consider the following: 20 of the warmest years on record were in the past 22 years (source: NOAA). There has been 2 times more high-tide flooding of US coasts over the past 30 years (source: NOAA). In the Arctic, 2018 saw the second-lowest overall sea ice coverage (source: Arctic Monitoring and Assessment Program). Since 1980, the number of storms with wind speeds over 250 km/hr has tripled (source: MIT).

But to make climate change accessible, maybe it makes sense to look at this a little more granularly: What does it mean for your company? Even in the short term, the effects of climate change increase the risk exposure of organizations and open them up to new threats with serious consequences. 

Here are 3 ways climate change is increasing your enterprise risk.

#1: Extreme Weather Increases Your External Risk Exposure

If you’ve ever had a natural disaster disrupt your business, you know that it can be a serious problem. Whether it’s a hurricane that takes out your organization for weeks or a simple power outage that results in several hours of downtime at a plant, any reduction of operating hours is going to cost you money.

Climate change is likely to make this problem worse. According to the US government’s national climate report, sea level rise and storm surge in the American Southeast could cost the region up to $60 billion each year by 2050 and up to $99 billion by 2090. MIT research has shown that since 1980, the number of storms with wind speeds over 250 km/hr has tripled. And it’s not just water and wind that is the problem—the national climate report also predicts that burned areas from wildfires in Southwest California could double by 2050.

So what do you do? Get advance warning whenever possible, and have plans in place that can be enacted quickly and by the right people. In particular, you should know exactly what elements of your enterprise are situated in high-risk natural disaster zones, and make sure you’re monitoring these areas to take quick action when an event occurs.

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#2: Compromised Infrastructure Might Require New Business Models

Even if your physical premises aren’t directly affected by something related to climate change, it’s likely that your business model relies on infrastructure that is currently in place—and this infrastructure is also at risk. According to the national climate report, the American Southeast will have the most bridges at risk of failure by the year 2050. In addition, it’s likely that more dams will break due to increased rain. Flooding, in general, will be more frequent; even right now, the American East Coast has over 7500 miles of roadway that can be impacted by coastal flooding. As the years go on, this number is likely to increase.

If your business model includes transportation via threatened infrastructure—or your business partners’ business models include transportation via threatened infrastructure—this is going to cause problems for your company. Knowing what is at risk is key, and having an alternative plan in place to reduce that risk is necessary.

#3: Climate Change May Decrease Labor Hours

The US government’s national climate change report estimates that, by 2090, high temperatures in the American Southeast could reduce working hours by 570 million. This especially affects farm workers—potentially costing an estimated $160 billion—but might also affect other manual labor roles, and will certainly affect any industries that rely on these types of roles as part of their business models. And high temperatures aren’t the only problems: the national report suggests that climate change is also likely to increase food- and waterborne illness, to make it harder to breathe and even to harm mental health.

Building this kind of risk into your enterprise resource planning isn’t easy, but that doesn’t mean you can overlook it. Future forecasting models should take into account a potential reduction in labor hours—and the resulting reduction in production that will be the result of it.

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Jason Miller

Sales Development Manager, North America

Jason is the sales development manager in North America at riskmethods. Got questions about how supply chain risk is threatening your business? Drop him a line at om@riskmethods.net.

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