Discover the impact of extreme weather on your business
As leaders from across the globe met in Swiss ski resort of Davos in January, the World Economic Forum (WEF) presented its stark ‘Global Risk Report 2018’. The report is based on surveys of a pool of 1,000 experts and decision makers about the major risks the world will face in the coming months. This year, the findings have shown that extreme weather events are the “most likely and most severe threat facing humanity” – for a second year running. This is closely followed by natural disasters.
“Extreme weather events in 2017 included unusually frequent Atlantic hurricanes, with three high-impact storms—Harvey, Irma and Maria—making landfall in rapid succession. According to the Accumulated Cyclone Energy (ACE) index, which is used to measure the intensity and duration of Atlantic storms, September 2017 was the most intense month on record. It was also the most expensive hurricane season ever,” concluded the WEF report.
Against this backdrop, should businesses worry? FM Global, leading commercial property insurers and experts in risk management, believe that organisations of all sizes across the world need to be concerned about the impact of extreme weather and ‘nathaz’ events on their businesses – be it a direct hit or one on the supply chain. However, they should use that knowledge to arm themselves against all eventualities.
“The WEF Global Risk Report findings is a clear reminder of the increasingly complex global risk landscape businesses are facing. The most successful businesses are those who strive to tackle threats to their business head on, understanding the value of effective risk management and building resilience across their operations.” – Philip Johnson, EMEA Division Manager at FM Global
Last year also saw many extreme temperature incidents. According to the WEF, when the data is tallied, “2017 is expected to be among the three hottest years on record—the hottest was 2016—and the hottest non–El Niño year ever. In the first nine months of the year, temperatures were 1.1°C above pre-industrial levels and further increases are inevitable.”
FM Global warns that this message is also a wake-up call for global businesses, as extreme weather can be hugely destructive and damaging to business operations. An increase in global temperature will result in more intense levels of precipitation – which will therefore increase the frequency and severity of flooding. It’s a clear indicator that mitigating against such risks should be top of the list of priorities.
With these warnings in mind, how can businesses turn concern into action? Historically, insurers have compensated for damage and lost income. But, FM Global believes in a much more thorough strategy, and advises against waiting for the worst to happen. It helps clients identify any ‘pinch points’ or weaknesses, to make sure they have the highest level of resilience so they can mitigate against disaster damage. It also helps businesses create continuity plans so that they can resume normal operations as quickly as possible after an event outside their control – and allow them to safeguard market share, reputation and profitability.
This advice is especially relevant in our interconnected, digitally super-charged world. “Each potential shock – environmental, financial or social – should be tackled as part of a complex system,” warns the WEF. Businesses can therefore no longer view their risk – or security – in isolation. As well as extreme weather and natural disasters, the same can be said for the WEF’s third greatest threat – cyberattacks.
According to the Global Risk Report 2018: “Attacks are increasing, both in prevalence and disruptive potential. Cyber breaches recorded by businesses have almost doubled in five years, from 68 per business in 2012 to 130 per business in 2017…….In addition, cybercriminals have an exponentially increasing number of potential targets, because the use of cloud services continues to accelerate and the Internet of Things is expected to expand from an estimated 8.4 billion devices in 2017 to a projected 20.4 billion in 2020. What would once have been considered large-scale cyberattacks are now becoming normal.”
FM Global has long understood the dangers of cybercrime. Hackers are constantly seeking new ways to exploit any vulnerabilities within organisations – and this includes along supply chains. Attacks can shut down entire assembly lines, block customers from placing orders, damage data and the very equipment companies rely on for the running of their business. And yet many organisations still don’t have a Plan B in place.
In an increasingly interconnected world, complacency towards cyber exposure is no longer an option. As seen with incidents such as WannaCry, cyberattacks can lead to complete operational shutdown. This type of event can result in loss of reputation and market share. Implementing measures that instil confidence in your ability to bounce back quickly is the best way to mitigate cyber threat and protect your bottom line. By developing business continuity plans with trusted partners such as your insurer and BC advisors, companies can ensure they can recover quickly should the worst happen.
While businesses are becoming more aware of the risks of cyberattacks, extreme weather and natural hazard events across the world, understanding exposure is key to becoming resilient. Knowledge imparted by experts can provide global businesses with practical mitigation solutions, so they can quickly bounce back should something happen.
The World Economic Forum’s Global Risk Report 2018 may well be in relation to humanity. But businesses are the lifeblood of economies – and the top three risks identified are acutely relevant to organisations all round the world today. To stay one step ahead, businesses should not simply worry, but must heed the warnings – and convert them into practical solutions to mitigate any damage in the future.