Two-thirds of the world's economic activity is directly or indirectly influenced by weather conditions. This means businesses across numerous sectors are increasingly exposed to weather-related risks.
WHAT YOU NEED TO KNOW
The data tells the story
On any given day, you’re likely to find news of an extreme weather event. As we prepare to publish this blog, there is news of flooding in Europe as well as reports that this past summer was the Northern Hemisphere’s hottest summer ever recorded. These events have far-reaching impacts, and they certainly affect supply chain operations. The repercussions for businesses are substantial.
The weather events of 2023 had a similar effect, as demonstrated by the indicator messages generated by Sphera’s Supply Chain Risk Management (SCRM) Software. Its Risk Radar component scans billions of news articles, commercial and government data sources, and roughly a million customer and supplier locations globally to provide timely, relevant alerts to supply chain and procurement professionals.
Our annual Supply Chain Risk Report summarizes the data collected throughout the previous year to offer a snapshot of risk events as well as information that helps companies strengthen their supply chains. The data and information in this blog come from that report.
Heat waves, droughts and wildfires
In 2023, climate change was to blame for wildfires in Canada, California, Hawaii and the Mediterranean amid regional heat waves and droughts. According to WRI data, heat waves are five times more likely today than 150 years ago.
These heat waves, combined with decreased precipitation, rising temperatures and strong winds, create the perfect conditions for large, frequent forest fires. The WRI also warns that wildfire emissions intensify climate change, creating a vicious cycle where more fires lead to warmer temperatures, which in turn fuel more fires.
Based on the number of Sphera SCRM indicator messages, the risk of wildfires increased by 21% in 2022 and another 10% in 2023. While supply chains may be less directly exposed to wildfires than other sectors, the impact of a fire can be devastating, especially when a supplier facility is destroyed.
Cyclones, hurricanes and flooding
Tropical cyclones and hurricanes, characterized by their intense winds and torrential rain, pose significant threats to supply chains. Intense storms often lead to flooding.
The catastrophic flooding in Libya triggered by Cyclone Daniel in 2023 demonstrates the destructive potential of such events, as do the typhoons that struck Hong Kong and Taiwan last year.
Unless businesses adopt proactive mitigation measures, supply chain disruption from such events is likely to increase, which could result in significant losses.
WHO THIS AFFECTS
Climate risks and extreme weather events impact supply chains and procurement
Scientists agree that climate change is making extreme weather events like storms, droughts and heat waves more common and severe. This creates challenges for procurement professionals.
- Uncertainty: The frequency and severity of extreme weather events is often unpredictable, making it difficult to plan effectively.
- Complexity: Supply chains are often global and interconnected, so it is hard to assess and manage risks.
- Stakeholder engagement: Engaging suppliers, customers and other stakeholders in climate risk management can be challenging, but it’s essential for effective mitigation.
KEY TAKEAWAYS
Extreme weather events are more frequent
Extreme weather events, such as tropical cyclones, hurricanes, flooding, thunderstorms, heat waves, droughts and wildfires, have resulted in:
- Disruptions to transportation and logistics.
- Damage to facilities and equipment.
- Supply shortages.
- Increased costs.
To mitigate the risks posed by extreme weather events, organizations need to improve forecasting and planning, diversify supply chains, invest in resilience and collaborate with stakeholders. By taking these steps, organizations can enhance their resilience to extreme weather events and minimize the negative impacts on their supply chains.
HOW SPHERA CAN HELP
Don’t just weather the storm: Shape the future of your supply chain
Sphera SCRM Software empowers you to manage weather-related risks with capabilities and tools that enhance supply chain visibility and risk mitigation.
- Real-time risk monitoring continuously scans a vast array of global news sources, social media and databases to identify potential threats that could disrupt your supply chain.
- Risk assessment and prioritization analyzes identified risks to determine their potential impact on your business and assigns priorities accordingly.
- Alerts and notifications provide timely alerts and notifications to enable a swift response to emerging risks.
- Tiered supplier mapping creates a comprehensive map of your supply chain, including multiple tiers of suppliers and their relationships.
- Risk assessment and mitigation assesses risks associated with each supplier and helps you develop strategies to mitigate them.
- Data collection and analysis collects and analyzes data from suppliers to gain insights into their operations, financial stability and sustainability practices.
Ultimately, SCRM Software offers a comprehensive solution for managing supply chain risk. By providing real-time monitoring, risk assessment and visibility into your supply chain, these tools can help you protect your business and ensure its continued success. Connect with Sphera today to learn how we can help you build a more resilient, sustainable and successful supply chain.
