A changing climate is transforming the risk landscape that countries and companies are facing all over the world. Extreme weather is likely to become more common as the planet warms, as highlighted by the recent Intergovernmental Panel on Climate Change (IPCC) Climate Change 2021 report. A co-author of one of the chapters within the report, Jessica Tierney, Ph.D., climate scientist at the University of Arizona, elaborated, stating that, “Extreme events, heat waves, droughts, heavy precipitation…they really are a result of climate change and the science is really able to detect that.” She followed with, “You can always get an extreme flood or drought by chance, but now we can show that the chances of some of these events happening would have been almost nil."
Europe is certainly not immune from the effects of extremes weather, as the continent has already seen major storms and flooding striking various countries this summer. Aon’s recent catastrophe report shows the impact of this extreme weather all too clearly, with insurers facing up to US$4.5 billion in claims after the costliest severe storm period on record in Europe.
Unfortunately, the trend of extreme weather events having a significant impact on people and businesses is only likely to become stronger in coming years. The UK’s Met Office is already warning that increasing temperatures will result in more extreme weather, both in terms of the frequency and intensity of the events.
Given these factors and trends, it’s clear that organizations should consider investing in flood and storm risk mitigation now, or risk damage to their property and disruption to their business.
Flood risk and stormy weather
One of the most important steps in climate resilience, is understanding the risk. So, what is causing greater flood exposure, even in the summer?
Looking at the UK specifically, the impact of climate change is already resulting in more extreme weather patterns. According to the latest UK State of the Climate report, 2021 has been measured as being the third warmest, fifth wettest, and eight sunniest on record, with the county as a whole estimated to be 0.9oC warmer and 6% wetter than 30 years ago.
Increased rainfall is understandably having an impact on the flood risk that organizations and individuals are facing, particularly when heavy rainfall is concentrated in a short period of time. This was the case in early 2020, where storms Ciara and Dennis both impacted the UK within the same seven days, contributing to the country’s wettest February on record and resulting in severe flooding and storm damage affecting many businesses across the country.
In addition to the increased rainfall that countries such as the UK are facing, urbanization also plays a role in exacerbating flood risk. As more land is built-on to accommodate for an increasing urban population, the ability for rainfall to be absorbed is reduced. Where this is the case, there is likely to be an increase in the volume of surface run-off into rivers, contributing to an increased likelihood of urban flooding. Additionally, where a region or country is heavily urbanized or urbanizing quickly, the more property and value may be in harm’s way during any given climate-related event, which is something that organizations and governments may need to consider. This is where the FM Global Resilience Index (www.fmglobal.com/resilienceindex) can be a good starting point, as it measures the resilience of nearly 130 countries to disruptive events.
Besides measuring urbanization rate, the Resilience Index also provides information about several other climate resilience measures. For example, natural hazard exposure ranks a country’s exposure to at least one natural hazard (e.g., flood risk), while natural hazard risk quality is a reflection of how well the 130 countries included in the index are mitigating their exposure to natural hazards. Finally, the quality of infrastructure driver provides important clues about a country’s prospective response to extreme conditions.
The threat to businesses
While the concept that extreme weather poses a threat to businesses may be easy to understand from a theoretical perspective, the scale of the vulnerabilities is best demonstrated by looking at the damage that is actually sustained.
According to FM Global data, the review of client losses between 2016-20, showed that the average flood loss incident caused an estimated US$826,000 of damage, while wind/hail losses averaged US$931,000 per event. That’s a significant impact on a business, and it doesn’t account for the other longer-term effects that a disruptive loss could have; impacts on reputation, market share, and investor confidence, for example. This underscores why risk mitigation is so important given such impacts are unlikely to be covered by insurance policies.
Risk mitigation effectiveness
Risk mitigation can take various forms, primarily split between long-term physical risk management investments and more short-term business continuity planning and crisis response.
Physical risk management can include various investments and actions, dependent on the type of risks that a location is vulnerable to. The specifics should be determined based on the organization's loss appetite and the importance of the building or facility, ensuring that any investment in resilience is appropriate and efficient.
Examples of physical risk mitigation actions which will help reduce the damage a storm or flood can cause, include:
- The installation of permanent flood barriers, preventing water from entering key areas of the building. The locations for these should ideally be decided based on up-to-date flood maps—such as FM Global’s online and interactive Global Flood Map, drawing on rainfall, flood, and topological data, along with local knowledge, to account for urbanization altering the exposure of a location.
- Permanently moving high-value equipment and products away from low-lying areas.
- The reinforcement of the building exterior—roofs, windows, doors etc.—to prevent wind and debris from entering the building and damaging equipment or products
In addition to physical risk management improvements, business continuity plans and crisis response actions can influence how much damage a facility suffers from a flood or storm event. These plans can include various actions undertaken by employees and business leaders to ensure they are ready for an extreme weather event. It’s vital that businesses give responsibility to on-site employees to check the building exterior before a storm strikes, for instance. Generally, organizations should develop clear crisis management plans which are easily communicated to employees so everyone understands the role they must play.
Additionally, it’s important that business continuity plans are practiced regularly, so that those on the ground feel confident and empowered to make the right decisions in a crisis. In today’s disruptive working environment, these plans should also seek to account for personnel changes and changing working practices to ensure that appropriate actions are taken both before and after a loss event.
A changing climate is a systemic issue
Beyond the storms and floods that were highlighted last summer, there are various other risks that a changing climate is likely to influence. As sea levels rise and oceans warm, it’s conceivable that extreme weather events such as hurricanes or typhoons may be affected, with some experts believing they could become more frequent or more intense.
Given the inclination for many organizations to have operations in coastal locations, it’s clear that risk management to mitigate extreme weather and flooding should also be a priority in coming months and years.
Regardless of the exposure that an organization faces, it is never too late to start planning. While a changing climate might expose locations to different levels or types of risk, the core principles of data driven, engineering-based risk management remain vital, and should be a focus for organizations looking to reduce their exposure to the systemic risks a changing climate will bring.
Visit FM Global's NatHaz Toolkit and Maps
New UN Climate Report: What you need to know
How to Improve Climate Resilience of Your Commercial Property
The Risk Management of Climate Change: Hear from FM Global’s manager of natural hazards and structures engineering
Three Paths Toward Climate Resilience
Contact an FM Global representative