Risk Trends 2025 and Beyond: Climate Crisis Fallout
Risk Trends 2025 and Beyond: Climate Crisis Fallout
The increasing frequency and severity of extreme weather events — like floods, wildfires, and storms — pose significant risks to businesses. These events can damage infrastructure, disrupt operations, and strain supply chains, affecting access to raw materials and production timelines. Additionally, new climate-related regulations, such as carbon taxes and emissions standards, are driving up costs and squeezing profit margins.
Is your organization prepared to address these challenges and build resilience in a changing climate?
How predictable are the negative side effects of climate change on your organization and how prepared are you to deal with them?
By 2025, the previous 10 years of climate change will have reduced Canada’s GDP by $25 billion, according to the Canadian Climate Institute.
That’s a big number. One that demonstrates the frequency and impact of weather-related disasters.
The increased frequency and severity of extreme weather events — like floods, wildfires, and storms — comes with physical risks. These events can damage infrastructure, potentially stall operations, and lead to costly rebuilding efforts.
Furthermore, these climate-related disruptions — like crop failures, transportation delays, or water scarcity — impact supply chains, which can hinder production, distribution, and access to raw materials.
Navigating the operational and economic storm
Governments across the globe are implementing climate-related regulations, like carbon pricing and emissions standards. And these changes, like a new carbon tax, can make it more costly to produce goods, squeezing profit margins.
Financial risks are closely linked to climate change. As the world shifts away from fossil fuels, business models may become less viable, leading to the repricing of financial assets. Even the banks, pension funds, and investment firms that finance businesses could feel the financial squeeze. Additionally, rising insurance costs and reduced access to funding can put a strain on financial performance.
Operational risks also arise from climate-related interruptions. Sudden changes in weather patterns can affect energy supply, water availability, and infrastructure stability. For instance, a factory might face power outages during a heatwave or water shortages during a drought, impacting its ability to operate smoothly.
Why stop there? Here are other risks to consider:
- Insurance excluding claims related to the impact of climate change
- Market risks from climate-related supply chain disruptions
- Reputational risks from inaction on high-probability climate risks
- Legal risks for insufficient employee protection
- Human capital risks from high turnover due to safety concerns
Questions to consider:
- Does your organization project, model, and prepare for the impact of extreme weather events and global warming on your operations?
- If you lost your top supplier — do you have others to call upon?
- Have you trained your employees and onsite third parties to mitigate the relevant risks related to climate change scenarios?
