The earth’s climate is changing at a faster pace than ever before. And these changes have widespread impacts to communities and the overall economy. From wildfires and flooding to litigation and public health, explore risks that are escalating because of climate change.
The Climate Change Risk Matrix featuring 10 key risks
The Risk Matrix, produced by the editorial team at Risk & Insurance®, plots critical risks due to climate change based on the frequency and impact of each risk.
When severe weather strikes, business operations can suffer. Unfortunately, these types of events are occurring on a more frequent basis and can result in significant social and economic impacts. In fact, in 2018, 14 extreme weather and climate events had losses exceeding $1 billion each. Property damage, business interruption, and disrupted care for injured workers are just a few factors that can impede a business’s ability to recover. There are ways that businesses can proactively protect their operations and employees. Conduct risk assessments, leverage risk management tools like predictive modeling, and develop a business continuity plan to help mitigate risks.
Floods are becoming one of the most common natural disasters in the United States due to climate change. Heavy precipitation events are projected to increase through the 21st century, to a level 50% to as much as three times the historical average. In addition, flooding can occur almost anywhere due to rainfall, blocked storm drains, melting snow, or saturated ground. So, even if your business is not in a flood zone, being prepared can help mitigate risk. Developing a flood emergency response plan that includes putting together a flood emergency kit, inspecting and fortifying your facility, and establishing during- and post-flood procedures can reduce damage and result in quicker recovery in the event of a loss.
Increased power outages
Severe weather is the leading cause of power outages, costing the U.S. between $25 and $70 billion annually. Between 2003 and 2012, an estimated 679 widespread power outages caused by severe weather were recorded. Power outages shut down businesses, close schools, impede emergency service efforts, and more. Proactive supply chain planning, which includes having a business continuity plan, understanding supply chain partners’ operations, and building in inventory and supplier contingencies can minimize disruptions from power outages and other interruptions.
Risk to public health
Higher temperatures often create environments that accelerate breeding of bacteria and insects and elevated concentrations of chemicals and methane emissions. These factors can lead to public health issues, from diminished lung function and asthma to more rapid infectious disease transmission. Local health care facilities and the public sector see the immediate impact of health-related climate change risks. But this can also impact any business if employees become ill and are unable to work.
Natural disasters are increasing in both magnitude and frequency. And more of these events can mean longer intervals of business interruption and lost revenues. Downtime due to power outages, supply chain interruption, and more can cost a company thousands of dollars an hour. In today’s environment, companies should prepare for the worst and having a business continuity plan is essential. No single plan works for every company, but there are crucial elements to creating a business continuity plan that can help a company prepare for, and bounce back from, a disaster.
Real estate woes
The coast attracts homeowners and businesses alike. But higher concentrations of people and construction along the coasts and in other disaster-prone areas further compound losses. Sea level rise contributed to nearly $16 billion in real estate losses in 17 states from 2005 to 2017. Sea levels are predicted to rise three to seven inches by 2030, jeopardizing thousands of homes and businesses.
Outdoor workers and heat
Summer heat waves across the country can easily surpass 100 degrees Fahrenheit. These higher temperatures, paired with humidity, can result in heat exhaustion, dehydration, or worse. For outdoor workers — those in the construction, transportation, energy, and other sectors — heat can significantly impact their daily lives, leading to heat-related illnesses and workers compensation claims. But there are ways businesses can monitor and reduce risk; make shade breaks mandatory, use uniforms made from breathable fabrics, and invest in wearables that can monitor employees’ body temperatures and heart rates.
In 2017, after Hurricane Harvey dumped more than 40 inches of rainwater on Houston, the Texas Senate budgeted more than $2 billion for recovery efforts. Public schools, state agencies, health and human services, telecommunication services and other municipal-run entities have seen the lion’s share of funds. But the fact remains that financial stress on municipalities after climate-related disasters is growing.
The liability landscape is shifting, and traditionally unaffected parties are now being drawn into liability battles that result in lengthy, expensive litigation. For example, fossil fuel plants are facing a surplus of lawsuits as more cities, states, and others hold them liable for climate change damages caused by carbon emissions. Jury awards are also growing with some even reaching into the billions of dollars.
Excessive heat, flooding, and violent hailstorms are killing plants, weakening crops, and condensing harvests around the globe. Most recently, excessive rainfall in the Midwest drowned corn and soy crops. Coffee, cocoa beans, and grapes are also affected. While the economic impact is uncertain, these types of stresses can disrupt the supply chain and affect businesses in a variety of industries.
The Risk Matrix is featured with the permission of Risk & Insurance®. The Risk Matrix is produced by the Risk & Insurance editorial team.
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