What Happens When El Niño Disrupts More Than the Weather

The Philippines has never had the luxury of treating climate risk as a distant concern.

Businesses have learned to operate through typhoons, floods and earthquakes. But not every climate risk arrives as a single, visible event.

El Niño can create a different business challenge: prolonged pressure across resources, operations and dependencies.

The World Meteorological Organization (WMO) says El Niño is firmly established and expected to strengthen into a very strong event, with a near 100% likelihood of persisting through February 2027. Impacts vary by location and season. In the Philippines, PAGASA says moderate to strong El Niño is present and may reach a very strong state before the end of 2026, while below normal rainfall may lead to dry spells and drought in some areas. Western parts may also experience above normal rainfall during the Southwest Monsoon.

This matters because businesses do not experience climate risk in isolation.

Pressure on Resources

Water is an obvious concern. Prolonged dry conditions can affect agriculture, food production, manufacturing, energy generation and other water dependent activities. The Philippine government has intensified preparations around potential impacts to water supply, food production and livelihoods.

But the business question goes beyond whether a company has enough water at its own facility.

What happens if a critical supplier does not? What happens if a commodity becomes more expensive because production is affected elsewhere? What happens if utility constraints or transportation disruptions increase operating costs?

These are examples of how a climate event can become a business risk without directly damaging the company’s property.

The Cost of Disruption

Financial losses do not always begin with physical damage.

A facility may remain operational while production is affected by shortages of raw materials, delayed deliveries, reduced supplier capacity or constraints elsewhere in the value chain. Revenue can fall when output is reduced. Margins can tighten as replacement inputs become more expensive. Procurement may need alternative suppliers, potentially at higher cost.

For complex supply chains, disruption may begin several steps away.

That is why understanding dependencies matters as much as understanding physical assets.

Dependencies That Sit Outside the Business

A company may know its own critical facilities and processes, but have less visibility into the vulnerabilities of suppliers, logistics providers and other partners.

The chain can be simple: Climate conditions affect resources. Resource constraints affect suppliers. Supplier disruption affects operations, revenue, margins and customers.

The risk does not stop at the organization’s physical boundary.

The Human Dimension

El Niño also has implications for people.

Extended heat can affect worker safety, attendance, productivity and wellbeing, particularly for employees working outdoors or in heat intensive environments.

For employers, the question is not simply whether employees can continue working. It is whether they can continue working safely and effectively as conditions persist.

This connects climate risk with workforce planning, business continuity and employee support.

There is no single forecast that can determine exactly how an organization will be affected. The more useful approach is to examine where the organization is exposed and test those dependencies under different scenarios.

Business leaders may want to ask:

1. Where are we most dependent on water, energy or temperature sensitive operations?

2. Which suppliers, facilities or logistics routes could create a significant knock on effect if disrupted?

3. How long could we continue operating if a critical dependency became unavailable?

4. Would our business interruption assumptions still hold if disruption lasted several weeks or months?

5. Where could we face losses without direct physical damage to our own property?

6. How could prolonged heat affect employee safety, attendance and productivity?

7. Are there gaps between our business continuity plans and our risk management and insurance arrangements?

These questions are about identifying vulnerabilities, testing assumptions and deciding where additional measures may be worth considering.

At Lockton, we look at emerging risks through their impact on people, operations, supply chains and financial performance. This helps you connect climate exposure with decisions on prevention, continuity planning, risk transfer and insurance review.

Because climate risk is not only about what happens to the weather. It is about what happens to the business when conditions change.