2012 marked the wettest summer in over 100 years for England whilst across the Atlantic in the US, American farmers are currently facing the consequences of last summer’s exceptional drought.
Crop insurer losses currently stand at $11.58bn and overall GDP is expected to be gravely affected.
Whilst the weather alone does not represent a new risk, what these and other events of last year highlight is the relentless increase in likelihood of extreme weather and a heightened volatility that affects almost every business sector worldwide. It is this emerging awareness that means risk managers can no longer afford to brush off the weather as something the consequences of which are beyond their control in 2013.
Whilst certain policies protect against damage caused by extreme weather events such as hurricanes and floods, it is the non-damage related impacts resulting from the ‘wrong’ weather that need to be addressed. Take the retail sector for example; unexpected seasonal weather can result in under or over stocking of appropriate merchandise; be it barbeques for that hot summer or overcoats for winter. This mismatch and the attendant impact on footfall impacts the revenues and margins of an already stretched high street retail sector. Other similar examples abound; from leisure and entertainment to power and energy.
As the changing pattern of weather continues to throw out surprises, one thing that can be predicted is its very unpredictability. The past is no longer a reliable indicator of the future. It is for that reason that businesses should address this exposure where they have not before: consider the available means to mitigate its impact before it is too late.