Pentti Tofte explores the link between climate resilience and business continuity. He explains why effective preparation for changing climate risks requires the use of clear and detailed data and analytics.
To drive businesses towards prosperity, decision-makers often seek stability. Because physical risks are deeply intertwined with business continuity, organizational leaders should not ignore the growing severity of climate-related events, such as floods, wildfires, or hurricanes. Freeze is also another risk they should look to account for, highlighted by the recent major cold snap which impacted parts of northeast America in early February, bringing disruption with record breaking cold temperatures. As these forms of weather-related risks increase in severity, executives should think strategically to address this issue in 2023.
So how exactly can businesses protect their operations today, maintain business continuity, and prosper tomorrow? How can they determine which of their facilities are at the highest risk, and in what ways? Often the answer lies in using the power of data to determine what impact the changing climate and climate risk could have on a business’ properties and operations, thereby allowing companies to plan for a stable future.
This data allows business leaders to make better-informed decisions about risk, especially when considering making changes to supply chains, facilities, and entering new markets. More specifically, the right data helps inform direct capital investments for improved property resilience, identifying facilities to consider retiring and evaluating locations for new ones, for example.
The data required to make such decisions should ideally detail information on a range of levels, from risks at specific company facilities, and associated supply chains, to comprehensive cross-comparisons on regional or global scales.
Each business is unique
Firstly, data and information closest to the individual business can be vital. Collecting detailed engineering data about your properties means you can assess vulnerability to many risks –particularly climate risk exposure. One way to accomplish this it to partner with engineers who use predictive analytics technology to capture the constantly evolving effects of climate change. This aids in determining which of your properties are most susceptible to a significant loss and the relative likelihood that such an exposure will result in a loss.
FM Global’s research has found that climate-related losses at commercial properties with the worst calculated climate risk are 30 times more likely to occur and be 180 times more severe than at properties with the highest climate resilience, underlining the severity of the issue.
In addition to this, there are tools available to provide even more accurate insight into your unique exposure to climate-related threats. The FM Global Climate Risk Report is one such example. The Report relies on millions of property-risk data points collected in more than 60,000 engineering visits each year to client sites. It is also underpinned by artificial intelligence, and predictive analytics to help clients prioritise their risk improvement efforts.
Beyond business specific data, looking at regional climate risk data provides greater context to the unique challenges each business faces. The key to resilience is to know where your risks lie and how to mitigate them. Natural hazard maps allow access to crucial cross-regional comparison data. They help companies grapple with some of the costliest natural hazards in the world. It is important that these maps are derived from detailed and up to date scientific data because as historical climate patterns are changing, weather-related hazards are becoming increasingly widespread and unpredictable.
Even wider comparisons across regions are possible when evaluating and working to mitigate climate-related risks. Especially for organisations that have a global footprint. Events on one continent can have a significant impact on facilities on another, usually in the form of supply chain disruption, which may affect your business as a whole. Global data is available in analytical tools like the FM Global Resilience Index, which ranks the relative resilience of the business environments of nearly 130 countries and territories, including key metrics focused on climate resilience. This enables you to compare the relevant data for the regions that are potentially, or are already, of importance for your business interests.
Resilience means peace of mind
Cultivating resilience is a choice, and when business leaders act proactively to address climate-related risks, events that otherwise may have turned into disasters for a business instead become manageable. When businesses are underprepared and forced to take reactive measures in the face of disruption it can be a lot more costly, in more ways than one.
While climate-related events typically cause property damage and business interruption, it can also trigger a loss of market share. When factories, supply chains or other major parts of a business are down for an extended period, customers are unable to buy products, meaning market share may be permanently lost and growth stunted.
This emphasises the importance of resilience, underpinned by reliable data. From helping you understand the unique climate-related threats to your supply chains and property, to making clear the probability of damaging regional weather events, data, research and engineering can guide business leaders in making smart decisions to ensure a prosperous future.
Pentti Tofte is Staff Senior Vice President, Head of Data Analytics, FM Global.