Engineering resilience to the business impacts of climate change
International government ministers, policymakers and civil servants recently gathered in Madrid for COP25, the United Nations’ (UN) annual environmental conference.
Opening the event, António Guterres, secretary general of the UN, said: “Climate-related natural disasters are becoming more frequent, more deadly and more destructive, with growing human and financial costs.”
Urging action from the international community, he warned: “The point of no return is no longer over the horizon. It is in sight and is hurtling towards us”.
As the UN encourages countries to implement change that will deliver a better tomorrow, senior company executives must ensure their organisations can cope with today and the more extreme weather patterns that climate change has already created.
Detailing the potential impact of climate change
There are two high-level questions executive boards should ask when considering their corporate resilience to climate change. First, how is climate change going to affect the company’s properties and operations? Second, what can they do to prevent losses and mitigate those that do occur?
Finding detailed answers to these questions is becoming easier. There is a global community of academics and scientists working to understand natural hazards and the threats they pose at a localised level. Their findings have never been more accessible, and companies can use the insight they provide to better inform their corporate risk assessment and mitigation programmes.
For example, FM Global developed its Global Flood Map, which uses extremely advanced hydrology and hydraulic science to analyse exactly how water will distribute itself through the natural and built up environment. It gives users a very detailed and accurate understanding of how their commercial property would be affected in a wide range of different flood scenarios.
Another example is the Global Earthquake Model, developed by the eponymous not-for-profit partnership, which is a consortium of public, private and non-governmental organisations. FM Global is a member and has contributed significantly to the Global Earthquake Model, which produces consistent and scientifically robust assessments of the earthquake exposure at any given location worldwide.
Armed with the risk information now available from such sophisticated predictive analytics tools, senior executives can then marry scientific research with practical action to improve their company’s resilience to the business impacts of climate change.
Effective risk mitigation
The better company executives understand the specific nature of the exposure at exact locations, the easier it is to implement targeted strategies that will deliver effective results.
The most effective solutions are physical loss prevention measures that protect the integrity of a building. The sort of things that keep the roof on when the wind blows, keep the water out when the rain falls, and extinguish fires when they start.
FM Global has written detailed data sheets that explain how policyholders can protect against many of the individual risks posed by hazards such as flood or earthquake.
Indeed, FM Global analysed 1,800 client records and calculated that every $1 spent on hurricane protection reduces the potential loss exposure by an average of $105.
FM Approvals, a member of the FM Global Group, tests products and services that are used in loss mitigation programmes to verify they meet rigorous loss prevention standards of quality, technical integrity and performance.
This all-encompassing approach means help is on hand to identify and quantify the risk, to implement effective mitigation measures and to find suitable products to do the job.
The right response
Predictive analytics tools and physical risk mitigation solutions allow businesses to create resilience in their operations before a loss occurs. But a good post-loss emergency response plan will allow companies to improve their reaction when a loss actually happens.
FM Global’s internal research shows that clients with well-organised flood emergency response plans have nearly 70% less damage, and resume operations sooner than those with either an inadequate or non-existent plan.
No matter the type of event, a well-designed and properly practised response will mitigate the total loss. It also plays an important part in getting companies up and running as fast as possible.
How much progress is made at COP25 remains to be seen and there will no doubt be a lot of publicity around next year’s COP26 event. It will be hosted in Glasgow and starts the 30-year countdown to 2050, which is increasingly becoming the date by which countries aim to achieve carbon neutrality.
Whether governments can agree and then hit these targets remains to be seen. In the meantime, corporate leaders must ensure their own businesses can cope with the more extreme weather events that the world is already experiencing.