Traditionally, supply chain risk assessments have prioritized concerns like factory fires, vendor insolvency, labor issues, cyber threats, and the effects of mergers. However, Jim Wetekamp, CEO of Riskonnect, emphasizes the increasing need to consider the impact of climate-induced weather events. The U.S. experienced a record-breaking number of costly natural disasters in 2023, with global losses totaling $250 billion, less than half of which was insured. The trend suggests a grim forecast for 2024 and beyond.
Anomalies in Weather Patterns Concern Businesses
Unusual weather patterns, such as unexpected heat in typically cold regions, are causing alarm. Companies are now facing snowstorms in places like Texas, which were previously unheard of. This shift requires businesses to develop both immediate and long-term strategies to manage these risks.
Immediate Response and Long-Term Strategies
In the short term, companies need detailed contingency plans with clear roles and alternative supply sources. These plans must be regularly updated to reflect the current supply chain landscape. Wetekamp notes that companies are improving in mapping their supply chains beyond their immediate connections, considering the full range of partners and customers.
Addressing the Ripple Effects of Sub-Tier Supplier Loss
The challenge of understanding the impact of sub-tier suppliers is becoming more apparent. Losing even one can halt operations, highlighting the importance of visibility across all supplier tiers. Advanced technologies like generative AI are aiding in the creation of predictive “what-if” scenarios to test business continuity plans.
Long-Term Planning Amidst Climate Change
For long-term planning, climate change considerations are crucial when deciding on new factory locations or diversifying suppliers geographically. Full visibility of the supply chain is essential for informed decision-making that looks years into the future.
Integrating Multiple Risk Factors
Weather risks cannot be isolated from other factors such as geopolitical tensions, trade tariffs, and labor costs. Comprehensive supply chain visibility and tools to manage potential disruptions are necessary for both immediate and future planning.
The Path Forward
Wetekamp observes that while some organizations are proactive in planning for long-term scenarios, many are still in the early stages of addressing climate risks and reducing carbon footprints. The industry must intensify efforts to prioritize climate considerations in risk management strategies.
