Nearly two-thirds (62%) of executives at companies with more than $1 billion in revenue said they were “not completely prepared” to deal with climate risk and the effects of last year’s hurricanes, and 64% said the hurricanes had an adverse impact on their operations, according to a new study. One of the reasons cited by executives on why they weren’t prepared? Denial of risk, according to the study.
But for the most part, they’re vowing to be more prepared to face potential climate change risk in the future, with 68% saying they will make changes to their risk management strategy. The study, from commercial and industrial property insurer FM Global, surveyed senior financial executives at large US-based companies with operations in Texas, Florida or Puerto Rico, about last year’s hurricane season.
- 57% of all survey respondents said they will put in place or enhance their business continuity or disaster recovery plans.
- 40% will invest more in risk management, property loss prevention, and/or reassess their supply chain risk management strategy.
- 25% will reassess their insurance coverages or their insurers.
Reasons for insufficient preparation
One reason for insufficient natural-hazard preparation is imprecise terminology. For example, being in a “100-year flood” zone does not mean you have 99 years to plan. Rather, there’s a 1% chance of such a flood every year. Another reason for insufficient preparation is over-reliance on insurance, which cannot restore market share, brand equity and shareholder value lost to competitors. A third reason is denial of risk, the study reports.
How to Better Prepare?
Companies in the path of these storms need to be prepared for interruptions of operations, disruptions to supply chains, extended power outages and damage to infrastructure to occur much more frequently. Those in the heavy manufacturing sectors, including chemical, petrochemical, and oil and production, also need to anticipate the increased potential for storm-related consequences that could impact ecosystems and communities surrounding these facilities, which would worsen the already devastating effects of these weather events, according to an article Environmental Leader published last fall.