Supply Chain

From parched rivers in China to flooded mines in Brazil, extreme weather is playing a suspenseful, high-stakes game of dominoes with global supply chains.

In today's interconnected global economy, hurricanes, wildfires, and droughts pose significant threats to business operations and supply chains. The impact of these disruptions is far-reaching and costly, creating production halts, transportation delays and affecting stock prices.

Understanding Risk Implications

Transportation infrastructure can be paralyzed by heavy fog, wildfires, extreme heat and massive snowfall. Some hazards, including landslides and heavy precipitation, cause direct damage to road and bridge segments, and collapse trees and power lines. In the UK alone, road traffic interruption due to floods cost the economy around £100,000 per hour per major road affected [1].

Elsewhere, a drought in China’s Sichuan Province caused a failure in hydropower from unseasonably low river flow. The industrial base served by this hydropower then experienced generation supply shortages, affecting the business uptime. This, in turn, delayed China’s supply of semiconductor exports, forcing thousands of electronics companies worldwide to halt production for several weeks [2].

The recent flooding in Sierre, Switzerland, has sent shockwaves across the global automotive industry, with Porsche, BMW, and Jaguar Land Rover (JLR) at the epicenter of the disruptions. Flooding of two aluminum factories owned by Novelis has led to an aluminum alloy shortage, affecting the production lines of multiple automotive brands. Due to the aluminum supply shutdown, JLR reported a 6% drop in revenues in 2024 compared to the same period in 2023.

Just to remind that the premiums paid by Novelis and JLR for flood insurance do not protect Novelis and any other company from flooding, nor don’t they protect either company from business losses. 6% drop in revenues it’s worth tens of billions for a company like JLR!

Same year, in 2022, the Mississippi River reached historically low water levels due to extreme drought. As a result, hundreds of boats were replaced by thousands of trucks, as barge rates tripled. The economic loss from supply chain interruptions was estimated at $20 bn [4].

In Brazil, extreme rainfall was identified as the primary disruptor for mineral mining companies. Due to abnormal precipitation conditions, one mining concern’s average operational loss for transportation was estimated to be $138 million per year [3]. This corresponded to 0.5% of company revenues.

Nordic regions also must deal with climate risks, as pipelines come under threat from thawing permafrost.

Leveraging Climate Risk Data for Resilience

Forward-thinking companies are turning to advanced climate risk analytics to protect their operations.

By transforming extensive records of extreme weather into actionable climate risk metrics, businesses can anticipate and reduce potential disruptions, financial losses and material damage.

Turning Climate Intelligence into Competitive Advantage

By integrating climate risk data into your business strategy, you can:

• Anticipate supply chain disruptions before they occur
• Optimize inventory management and logistics
• Make informed decisions on facility locations and infrastructure investments
• Enhance long-term financial planning and risk management

Secure Your Business Future

As climate risks evolve, so must your risk management strategies. Don't let your company become another statistic in the growing list of climate-related business casualties. Invest in climate and extreme weather intelligence today to ensure your business thrives tomorrow. Commission the support of state-of-the-art climate risk analytics to unlock the risk management and operational resilience.