Mapping the path to climate resilience and business continuity

How can cutting-edge risk mapping tools and proactive measures empower businesses to successfully navigate the challenges of climate change and become more resilient? Jérôme Picard, Account Engineering Group Manager at FM, recently discussed the pivotal role mapping climate risk can play as part of a wider risk management strategy at the 31st Rencontres du Risk Management in Deauville, which took place from the 7th to the 9th of February 2024. 

Why should companies prioritise climate resilience in 2024? 

Ultimately, there are two key reasons why this issue is so important for businesses. Firstly, the climate context has changed considerably. Losses associated with natural events have increased significantly in recent years with risks becoming more and more frequent and intense, impacting infrastructure, buildings, and supply chains. We have also seen the emergence of so-called “secondary” perils (including forest fires, tornadoes, hail, freezing temperatures, and intense snowfall) associated with climate change. These are becoming increasingly devastating and are still inadequately mapped and difficult to predict. 

Secondly, the impact of climate events on companies is increasing. As a result, physical damage linked directly to a loss can cause a decline in production and sales, but it can also have a longer-term effect on the company’s reputation if it fails to deliver products to key customers or take clear action in response to climate change. We believe that this trend will develop further in 2024, given that risks are multiple, complex and increasingly interconnected. 

How can companies implement an effective climate resilience strategy? 

At FM, we believe that most losses can be avoided. To do this, it is necessary to identify and understand the risks so preventive measures can be put in place to ensure business continuity. Assessing current climate risks is a fundamental starting point and climate hazard maps can be a useful tool for identifying them. In addition to this, field analysis, which lists the specific issues a site faces, can help highlight the potential repercussions on a company’s value chain. 

FM engineers use predictive analytics coupled with loss histories, creating a map of future climate risks. Here, innovation plays a crucial role now more than ever, especially with recent advances regarding artificial intelligence (AI). For instance, AI makes it possible to develop products and solutions for automated risk identification. It makes it easier to prioritise the investments and measures to be put in place to strengthen corporate resilience to climate challenges. This process improves a company’s knowledge of the nature and origins of climate risk with the aim of avoiding losses and ensuring business continuity. 

How do mapping tools provide companies with effective support in fully addressing climate risk? 

When faced by complex, multiple and interconnected risks it is important to use several mapping tools that are capable of covering all potential threats. First of all, we need to identify geographical areas exposed to extreme climate phenomena, using a tool dedicated to climate change. This is made possible by our Climate Risk Report, a product based on the numerous data-points collected by FM as part of the 100,000 visits made each year by our field engineers to insured sites.

Secondly, a client-specific chronic risk predictive tool that presents data on the impact of climate change and natural hazards can prove useful. This is precisely the purpose of our Climate Change Impact Report. Finally, to take into account the interconnectedness of risks, companies can use a tool capable of mapping all the threats facing them. The FM Resilience Index, which ranks 130 countries and territories based on the resilience of business environments, gives companies a clearer picture of the risks they face. These interactive tools are designed to support global businesses as they make critical strategic decisions in site selection, supply chain design and loss prevention. 

What concrete solutions can companies put in place to protect themselves against climate risks? 

Once the company’s priorities have been identified by risk mapping, a number of practical measures and investments are needed to help ensure business continuity. The first step is to implement an emergency response procedure which lists the actions to take before, during and after a loss. Companies can also make changes to the site to reduce risk, for example, by raising essential production equipment above the predicted flood level, in the case of flooding or installing permanent or temporary systems (such as flood planks) for protection. Finally, FM Approvals, an independent laboratory and member of the FM group, provides a list of FM-approved products that meet the highest quality, technical integrity and performance standards. For instance, installing these products at strategic locations around a site can help to effectively contain rising water levels, or avoid a roof or piece of equipment being torn off during a storm. Appropriate measures can be applied to almost any natural disaster (fire, hail, or storms) to limit the impact. 

In short, the impact of climate risk is not inevitable. To guard against it, we need to develop a resilient, proactive strategy to ensure business continuity. But let’s not forget: From climate risk mapping to concrete preventive measures, this strategy relies on close collaboration between insurer and insured.