Businesses may need to add climate change risks to crisis solutions plans

Flash floods, storms and wildfires are likely to become more frequent and severe due to climate change. As a result, companies may need to include these risks in their crisis scenarios in order to protect staff, operations, reputation and revenues.

The number of weather-related disasters has increased by a factor of five over the last 50 years, according to the World Meteorological Organization (opens a new window). This trend has been driven by climate change, more extreme weather, and improved reporting, the organisation noted.

Changing weather patterns

Extreme weather events are becoming less predictable. The flash floods in July 2021 in Germany took the country by surprise because of how fast the water levels rose to heights beyond previously recorded levels. Parts of Rhineland-Palatinate and North Rhine Westphalia were inundated with 148 litres of rain per sq metre within 48 hours (opens a new window) in a part of Germany that usually sees about 80 litres in the whole of July. The water masses made houses collapse, ripped up roads and power lines, and cut off entire communities from power and communications.

Floodwaters produced widespread damage to homes and swept away vehicles, bridges and other infrastructure. It is dubbed the worst natural disaster in the country in more than half a century (opens a new window), killing 184 people in Western Germany. In Belgium, which was also affected, the floods left 42 dead.

Further, a 2021 summer of record-setting heat in southern Europe (opens a new window) has set off devastating wildfires that have torn through forests and homes and destroyed vital infrastructure from Turkey to Spain. Several thousands of people had to be evacuated. By the end of October, almost 0.5 million ha had gone in flames, according to the Joint Research Centre (JRC) (opens a new window) of the European Commission. In their report, researchers noted an increasing trend showing higher levels of fire danger, longer fire seasons and intense fast spreading “mega fires”, on which traditional firefighting means have little power.

Scientists predict that long-term effects of climate change will include a decrease in sea ice and an increase in permafrost thawing, an increase in heat waves and heavy precipitation, and decreased water resources in semi-arid regions. The consequences will have a diverse impact on companies’ operations and their employees, depending on the nature of the business, the location and the risk mitigation measures put in place.

It is therefore essential that companies account for these weather-related emergencies in their crisis management plans. This will require a review of the emergency planning documentation to make sure that plans are applicable, functional, and tested regularly.

Making a company climate change proof means evaluating the assets and risks, such as infrastructure, service areas, operations, and safety through the lens of a potential weather event. Such an analysis may involve the use of artificial intelligence and weather risk modelling tools.

Tips for an adjusted crisis response plan

  • Anticipate the potential sources and impact of climate change related event.

  • Consider collaborating with experts in meteorology and risk communication who can provide historical weather data and projections and can help translate that data into actionable information for your organization.

  • A detailed weather hazard risk assessment should be part of every organization’s business continuity and emergency preparedness reviews.

  • Implement preventive measures ahead of time.

  • Establish an emergency response team and procedures.

  • Develop a checklist that includes important contact lists for employees, clients/customers, vendors, insurance holders, utility providers, etc. and keep it printed and easily accessible.

  • Make preserving confidential business data and/or recovery of that data in the aftermath a top priority.

  • Test and update your plan regularly, at least once annually, since business processes and weather patterns constantly evolve.

  • A discussion-based “tabletop exercise” can serve as an effective tool to test the plan with a meteorologist who can help running this exercise with mock weather scenarios.

  • Ask your partners/suppliers if they have business continuity plans in place and if they would be able to continue operating in case disaster strikes.

  • If employees continue working remotely following the Covid-19 pandemic, executives should consider potential location-based power and internet outages or even evacuations resulting from flash floods/hurricanes/storms.

Additional solutions

There are solutions available to help support and respond to such events. Businesses can consider a bespoke crisis response insurance policy that protects operations, reputation and revenues in case of a crisis by ensuring a fast response that minimises damage. Such a policy can include 24/7, year-round access to risk consultancy firms, helping insureds to fulfil their duty of care to employees, while providing security, communications and crisis response capabilities. The products can include cover for up to 56 insured events with certain insurers including natural disasters, environmental disasters and event pandemic within policy. Other potential triggers range from bribery to lone assailants, kidnap to political upheaval and industrial accidents.

In addition, there is the option to add environmental impairment liability (EIL) to the cover. This includes emergency response/crisis event costs (ex-USA) involved in managing pollution conditions in the immediate period following discovery. Further, this coverage can pick up damage that is realised many months or years after the original event. It pays in advance of any enforcement or third-party liability. EIL insurance also covers the peril of our changing climate acting upon insured locations and the pollution potential that lays latent in, on, or under the land.

For further information, please contact:

Jack Matthews, Special Contingency (K&R) Broker Accident, Health, Sports & Contingency

M: +44 (0)7876 847 489

E: jack.matthews@lockton.com

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