More than one in four organizations worldwide are already feeling the effects of climate change. In the U.K., three in five businesses have been negatively impacted by extreme weather in the last three years.

Despite this constantly evolving threat, too many businesses have their heads buried in the sand. Only one in eight have fully weighed the risks of extreme weather disruption, while just one in six have devised a plan to adapt to future climate change.

As the world faces more frequent and disruptive natural disasters, businesses must anticipate the most concerning areas climate change will impact and take measures to protect themselves.

Climate change and the global supply chain

COVID-19 has led to massive global supply chain disruptions. Climate change can take things up a notch, as extreme weather events like hurricanes, floods, wildfires, and droughts directly affect 70% of all economic sectors worldwide.

Take Taiwan, for example. One company manufactures most of the world’s advanced semiconductors. It takes a lot of water to make these chips, which usually wouldn’t be a problem since the country gets more rain than almost anywhere on the planet. However, this year, typhoon season didn’t produce any typhoons and the rainfall was minimal, leading to the nation’s worst drought in 56 years – a disastrous scenario for chip manufacturing.

The global electronics sector relies on these chips for everything from smartphones and PCs to cars and gaming consoles. And, since most manufacturers rely on this one producer for their chips, this shortage has serious repercussions. The auto industry, for instance, is expected to lose $210 billion in revenue in 2021.

It’s situations like this that stress the importance of identifying your concentration risk. Putting too much stock in a single third-party partner can leave you high and dry if it experiences a disruption and can’t fulfill your needs. Automakers Ford and General Motors are addressing this concern by taking steps to develop their own chips.

While businesses need to take stock of their own operational resilience to withstand climate-related events, they must also do the same for the vendors they count on. Only by evaluating their resilience risk can you determine their preparedness in the face of disasters.

The impact on facilities and workers

Climate change will also be responsible for increasing the frequency of more abnormal events.

Businesses in certain regions must now plan for climate disasters they’ve never had to consider before – like, in Texas, where business continuity (BC) and disaster recovery (DR) plans must be modified to account for winter storms.

Furthermore, the uptick in the number of weather events, alone, will put additional pressure on commuters and offices. If the weather is too hot, too cold, or too wet for companies’ existing infrastructure, they’ll have to factor in the cost to upgrade. Alphabet Inc., Google’s parent company, noted that rising temperatures could make it more expensive to cool its data centers.

If updating current infrastructure proves to be too costly, many organizations may opt for a total embrace of remote or hybrid working. This could force them to reevaluate their current cloud usage and possibly accelerate adoption.

Preparing for compounding events

The U.S. suffered a record 22 billion-dollar disasters in 2020.

More tropical storms formed in the Atlantic than ever before – with an all-time high of 12 making landfall – and the most active wildfire season on record ran rampant out West, with Colorado suffering its three largest wildfires ever and California experiencing five of the six biggest in the state’s history.

These 22 events cost the country $95 billion in total damages. More frequent climate-related issues, however, are only part of the problem. Businesses will now have to contend with multiple disasters at the same time.

We’re still in the middle of a global pandemic, and cyber incidents are also on the rise, with ransomware and phishing attacks exploiting businesses at a breakneck pace. Most businesses struggle to address one issue at a time. So, what happens when there’s two or three crises happening simultaneously?

BC and DR programs must now reflect the threat of a broader range of natural disasters – and their potential effects on essential services and utilities – and the possibility of other disruptions occurring simultaneously. Adapting your strategies to account for compounding disruptions is essential to positioning your business to remain resilient no matter what.

ABOUT THE AUTHOR

Chris Butler

As lead principal consultant of resilience and security at Sungard Availability Services (Sungard AS), Chris Butler provides senior leadership teams with bespoke training sessions on crisis leadership and management, business continuity, disaster recovery, information security, IT service continuity, and crisis response capability building and coaching.

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