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Business Management Review | Tuesday, February 15, 2022
90 per cent experienced revenue losses in the five-figure range due to staff disruptions, decreased client demand, utility outages, and supply chain concerns.
FREMONT, CA: Hurricane Harvey hit Southeast Texas in 2017, which resulted in USD 125 billion in economic losses. According to a recent evaluation of nearby firms, 90 per cent experienced revenue losses in the five-figure range due to staff disruptions, decreased client demand, utility outages, and supply chain concerns. Property damage victims endured increased losses due to having to close down a portion of their business for weeks or months at a time while repairs were being done.
Since 2017, there has been an average of 17.8 weather-related disaster incidents per year in the US. There have already been nine weather/climate crisis events in 2022, with damages averaging over USD 1 billion. Major difficulties are being faced by economies and people all around the world as a result of rising temperatures, floods, droughts, wildfires, and other effects of climate change. As a result, companies are under pressure to explore fresh approaches to permanently lower their carbon footprint. However, many people still need to prepare for the effects of climate change on their businesses.
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Many businesses are already feeling the heat due to supply chain disruptions and environmental asset damage. According to a recent World Economic Forum analysis, extreme weather events like global heat waves might potentially drive up the price of raw materials used in manufacturing, which would inevitably result in significant revenue losses across industries.
The vast majority of businesses have plans in place for Covid-19 and cyberattacks, but the World Economic Forum's Global Risks Report 2021 found that the top three most probable risks for businesses over the next ten years are extreme weather, ineffective climate action and human-caused environmental damage. However, many still lack well-defined strategies and risk analysis to direct decision-making.
According to Miguel Modestino, an associate professor and the director of the Sustainable Engineering Initiative at the Tandon School of Engineering at New York University, one of the major challenges for general business operations is that companies are still familiar with the many variables involved in collecting climate data.
Tracking climate data does need internal climate and data science knowledge, sensors, historical weather data, considerable human labour, and computational power. Even if they successfully gather this information, the challenge comes in combining and analysing the many factors to produce a comprehensive picture of the situation on the ground.
For instance, combining flood risk information with road and elevation information or many other sets of information is necessary to fully comprehend the economic damage caused by a flood. After gathering climate data, the next problem is figuring out how to draw useful conclusions from it and how to use them to improve company operations.
Only 41 per cent of firms, according to an EY survey, perform scenario analysis of climate-related risks. Many organisations lack a clear understanding of the possible risks, costs, and action plans in the increasingly likely scenario that a weather-related crisis occurs. When business leaders must provide this information to investors and other stakeholders, budgeting and other critical decisions become a guessing game without this insight.
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