Since 1980, the U.S. has had about 373 weather and climate disasters, each with damages reaching or exceeding $1 billion—totaling almost $2.65 trillion in overall costs, according to the U.S. National Oceanic and Atmospheric Administration (NOAA). The agency’s December data shows there were 25 climate disasters, with losses over $1 billion each, in the U.S. in 2023.
While the cost data isn’t tracked equally in all countries, what the U.S. has experienced is an indication of the economic cost climate hazards can cause worldwide. This is one of the reasons why severe weather continues to be among the top concerns for C-suite executives. According to a Deloitte’s recent survey of global business leaders, 75% of execs said they’re increasing climate-related initiatives and investments because their organization is feeling the effects of climate change—from employees’ health to business strategy and operations.
Regardless of one’s political or social position on global warming or the ultimate cause of climate change, there is no disputing that extreme weather creates a wide range of dangers and disruptions for organizations—from disrupted supply chains to rising insurance costs and labor challenges.
In this blog post, I’ll explore five major climate risks all business leaders need to be aware and stay ahead of, as well as recommendations on how to prepare and respond to those risks.
Weather Risk No. 1: Extreme temperatures
While official data hasn’t been released, global climate experts agreed that 2023 was the hottest year on record. Heatwaves affected almost every single region in the world during 2023. The record-breaking heat helped fuel other extreme weather events around the globe, including wildfires, floods and droughts.
There’s a chance 2024 could be equally as hot or even hotter. A strong El Niño has returned, bringing warmer temperatures with it. The climate pattern—which occurs every two to seven years—is known to send temperatures soaring, possibly resulting in more natural calamities in Canada and the U.S.
Not only does the intense heat endanger public health and safety, it also impacts business operations, including damages to facilities and workforce disruptions, particularly if a company’s production involves outdoor labor.
Most infrastructure is built to endure a range of temperatures considered normal for the region in which it resides. But regions’ expected temperature norms are changing dramatically and quickly. From an operational cost point of view, extreme temperatures are driving up production, refrigeration and overall energy costs across a wide range of industries.
Weather Risk No. 2: Wildfires
Exacerbated by extreme heat, devastating wildfires have been a recurring theme over the past few years. A wildfire in the U.S. in 2023 ripped through a community on the Hawaiian island of Maui. The fire—the deadliest in the country in 100 years—claimed over 100 lives and left what was once a lively economic and cultural hub in ruins. In Canada, wildfires engulfed around 18 million hectares of land in total in 2023—the country’s worst season on record.
In Europe, Greece battled hundreds of deadly fires all summer long in 2023. One of them—a forest fire in northern Greece—was the largest ever recorded in the Europe Union. Intense wildfires also took a heavy toll in Russia, Spain, Portugal and Chile. Australia and other parts of the world continue to suffer from annual wildfires, which are starting earlier than usual, and steadily increasing in frequency and size. And they compromise critical infrastructure and populations living in close proximity.
According to the United Nations, uncontrollable wildfires are projected to increase globally by 14 percent by 2030, 30 percent by 2050 and 50 percent by the end of the century. They can damage and/or significantly disrupt critical public infrastructure, such as transportation and water management facilities, as well as businesses operations. For example, between May and June of 2023, Canada’s historic wildfires forced energy producers in Alberta—the country’s main oil-producing province—to temporarily shut down operations and output. The forestry industry also had to shutter sawmills, driving up lumber prices, setting production back for months and slowing new home construction. Rolling blackouts—meant to prevent more fires—can also impact major technology centers that supply the automotive, engineering and manufacturing industries.
In addition, high levels of fine, noxious particles in the air can inflict serious health issues on employees who work outdoors, live in or near affected areas, or commute to and from the office.
Weather Risk No. 3: Hurricanes, cyclones and typhoons
In its November report, NOAA found that the 2023 Atlantic hurricane season—with 20 named storms—ranked fourth for the most-named storms in a year since 1950.
Other 2023 catastrophic events include:
- In March, Tropical Cyclone Freddy caused nearly 700 deaths in Malawi
- In May, Cyclone Mocha killed more than 100 people in Myanmar
- In July, Typhoon Doksuri caused significant rainfall and flooding throughout at least 16 cities and provinces in northeastern China
Unlike some extreme weather events, hurricanes, cyclones and typhoons usually come with several warnings, giving organizations the advance notice they need to prepare.
But the cascading effects of these events are not as easy to keep abreast of.
When Hurricane Ian—the third-most costly hurricane in the U.S.—struck Florida and nearby states in 2022, it resulted in at least 156 deaths, and severely damaged tens of thousands of structures and critical infrastructure, such as roads and bridges. More than nine million people were without power for days. Numerous businesses were flooded.
Organizations need to know about such disruptions as soon as they occur to keep their employees and customers safe and ensure business continuity. For example, when Ian strengthened and started moving toward Cuba and the U.S., Dataminr alerted its customers on the hurricane’s developments in real time ahead of landfalls. Customers were then able to quickly halt operations, notify their employees of evacuation orders and secure critical assets.
Hurricanes also come with a heavy price tag, and real-time information on potential damages and associated risks is critical. In the U.S., hurricanes Katrina (2005), Harvey (2017) and Ian (2022) cost approximately $176.3 billion, $136.3 billion and $112 billion in damages respectively.
Businesses often suffer direct expenses, such as the cost of renovating damaged property and equipment, as well as indirect expenses from lost revenue—and increased costs due to the shortages that often follow. But the overall impacts can be long-lasting and difficult to assess as the recovery process often takes years, even decades.
Weather Risk No. 4: Floods and storms
One of the immediate effects of hurricanes is flooding. However, even without a hurricane, prolonged and heavy rainfall, as well as slow-moving thunderstorms, can lead to floods.
In 2023, we saw a series of deadly floods and storms worldwide. Multiple countries in South America, Europe, Africa and Asia suffered from heavy flooding that resulted in extremely high casualties and significant infrastructure devastation.
As one of the major climate risks to businesses, catastrophic flooding can destroy physical assets and infrastructure. This includes inventory damage, transportation disruptions, revenue loss, and power surges. At the same time, employees, as well as coastal and river communities, are at risk.
One of the first considerations business leaders need to take to prepare for flooding is to recognize whether their building’s elevation levels are above flood risk zones. Additional considerations include employees’ home locations and whether or not business continuity plans should operate remotely or from another facility if and when flooding were to occur.
Weather Risk No. 5: Winter Storms
Winter storms can pose an even greater risk to organizations than the four weather risks touched on above. This is because, typically, winter storms are not predicted with the same certainty or specificity of extreme heat or even flooding.
They often occur after a combination of changes in the jet stream, which plunges cold air masses further into North America and Central Europe. At the same time, precipitation and clashes between air masses can create winter “superstorms” that can be just as damaging as a hurricane, typhoon or cyclone.
These storms also have the potential to impact a much larger geographical area than hurricanes or floods because their extreme cold air masses can cover an entire continent for days or even weeks. The results are a loss of business, transportation and power outages as well as changes in consumer behaviors and employees’ ability to react—compounding the need for real-time information.
Gearing up for these winter events can take on similar, but also new, dimensions in terms of preparations and business continuity. Given the potential for air, road, and even rail travel to be disrupted for days after a major snow storm, organizations need to consider how they can manage their supply chain and keep operations running smoothly.
Assess Your Organization’s Risk To Severe Weather Events
All five of these extreme weather and geological phenomena have occurred in 2023. Therefore, it’s imperative that businesses accelerate their climate risk assessment, mitigation, and adaptation strategies.
First, make sure you understand what your organization’s exposure is, be it to wildfires or hurricanes. Then, assess your organization’s ability to monitor and respond. During your assessment, be sure to ask yourself the following questions:
- Are my facilities or business travel destinations located in an area prone to severe weather?
- What is the criticality of operations at sites that are vulnerable?
- Are the elevation levels of our buildings above flood risk zones?
- Do any of our facilities rely on national grid power and power supplies?
- Do any of our buildings have shelters inside of them? Are there any shelters available in the local community?
- Do our locations have the needed resources on hand, such as emergency kits, fresh bottled water, additional fuel, and backup generators?
- Is the landscaping around our facilities storm resistant?
- Do we have the real-time information needed to stay ahead of and respond to the risks and impacts of extreme weather? And does that information include credible, authoritative data sources such as the U.S. National Weather Service and the World Meteorological Organization?
- Do we have clearly defined preemptive measures in place, including severe weather practice drills and emergency action plans that include how to account for employees and how and who will be responsible for communications?
This blog has been updated from the original, published on October 27, 2021, to reflect new events, conditions or research.
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