Climate Risk to Your Business Has Grown, Are You Ready?

January 17, 2019

By Rich Tehrani - Group Editor-in-Chief, TMC

Investors are demanding that organizations have environmental action plans. They’re also asking CEOs to consider risks to their businesses caused by shifting consumer attitudes toward climate change and climate change itself. The risk doesn't affect just the developing world, where infrastructure is often weaker. Hurricanes Harvey, Irma and Maria combined in 2018 to make the United States the most disrupted region for the first time.

The most dramatic example of a company coming under pressure from risks related to the environment is Pacific Gas and Electric. The California utility company is facing billions of dollars in claims over the deadly 2018 Camp Fire, and it said earlier this week that it would file for bankruptcy on January 29. The company cited at least $7 billion in claims from the Camp Fire, which caused 86 deaths and destroyed 14,000 homes. It is believed the fire was started when a PG&E (News - Alert) power line came in contact with nearby trees.

According to CNN, Alison Martin, the chief risk officer at Zurich Insurance Group, said it doesn't matter whether the company’s leadership “believes in climate change or [what they think] the causes of it are.”

Shareholders are becoming more concerned than ever before. The good news is, even if climate disasters like hurricanes continue at average levels and don’t continue to increase, businesses will still have to deal with resulting floods and wind damage. Often, these conditions lead to downed power lines and other problems that keep businesses from operating.

A disaster recovery plan is essential; companies need to imagine worst-case scenarios, figure out how much risk they will tolerate, and then plan on how to address the risks. Making sure UPS batteries are functioning is a likely first step, as is looking at where data is stored an ensuring it can be accessed if the data center or company headquarters is flooded or not accessible for some time.

Edited by Erik Linask

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