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Volatile weather impacts business profits

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Strong links between unexpected weather patterns and company performance.
Bad weather “no longer a good excuse” for missed sales targets.
Pre-Christmas retail season one of many examples of key weather risk.
Annual costs from routine weather variance1 can triple those from the headline-grabbing global nat cat losses.
Growing demand in specialist products to offset losses from unexpected weather, but many businesses still unaware of options for tackling the challenge

Volatile weather activity is increasing around the world as evidenced by recent major events, such as typhoon Haiyan in the Philippines or flood Cleopatra in Sardinia. Yet, while extreme events may capture the headlines, minor fluctuations in expected weather can have big impacts on business performance across a wide range of industries.

In its new report ‘The Weather Business – How companies can protect against increasing weather volatility’ which focuses on the growing importance of weather risks for businesses, industrial insurer Allianz Global Corporate & Specialty SE (AGCS) highlights the economic impact of fluctuating weather conditions and how companies can protect themselves, using new approaches to ‘weather risk management’.

According to the report, the economic impact of increasing everyday weather volatility far exceeds the already huge sums annually associated with natural catastrophes. AGCS estimates that the impact of routine weather variation on the European Union’s economy could total as much as €406 billion (£346 billion /$561 billion) a year. As a comparison, during 2012, there were 905 natural catastrophes worldwide, 93 percent of which were weather-related disasters, costing US$170 billion2. And what’s more, the direct cost of weather volatility around the world is increasing significantly. According to Allianz, insurers have paid out US$70 billion globally for damages from extreme weather events every year for the last three years alone. Back in the 1980s, “only” US$15 billion a year was paid out for such claims.

In many countries, retail is one sector which is heavily exposed to poor weather, especially in the all-important pre-Christmas period when retail footfall traditionally increases significantly. Other sectors which can be badly affected include the agri-food industry, construction, distribution, energy, tourism and transport.