Why resilience can make or break your business

With the increased effects of climate change becoming more and more clear every day, resilience is a hot topic in company boardrooms around the world. More and more businesses understand that it’s critical they become prepared for whatever disruptions the future holds.

We are already experiencing higher incidence of extreme weather; in the 21st Century, the number of tropical storms and hurricanes in the Atlantic has increased each year. Rising sea levels and heavy rainfalls are leading to more floods in coastal cities. On top of that, businesses face threats from earthquakes, resource scarcity, deforestation, and loss of biodiversity. Though most, but not all these issues are the result of human activity, no single person or business can reverse these trends. Savvy companies are preparing to weather these figurative and literal storms.

Questions that stymie action

How do these risks affect your company and its ability to operate come what may? How can you navigate around these challenges and maintain business continuity, protecting your assets, your employees and your clients? Maybe you’re already implementing flood protection at your offices and factory plants. Undoubtedly your company has insurance just in case things go wrong. But is this enough to prepare your business for the myriad calamities that could occur? More vexing is the question of how to justify investments in resilience when the disasters you’re guarding against may not actually happen. If your business is not affected by a disaster, does that mean you’ve wasted resources? Is it perhaps better to just run the risks?

Where to get started

The truth is, there is still a lot we don’t know. When it comes to climate change, some scientists think we still have time to avoid the worst potential outcomes, while others proclaim that we’ve already gone over the proverbial cliff. It’s hard to say what our world will be like in fifty years. We can certainly make educated guesses about what the future holds, but we don’t know what advancements in technology will bring. Perhaps in twenty years people will all drive around in cars that clean pollutants out of the air instead of spewing them out of exhaust pipes. And right now, we can’t predict whether something will happen that finally motivates humanity to change its polluting ways.

Nevertheless, if we look over the short term, there’s a lot we already do know. We can say with relative certainty, that no matter which industry you’re in, over the next ten years, the continuity of your business operations faces the following risks:

• The effects of extreme weather: flooding, draught and extreme high temperatures

• Resource scarcity

• Salinization of ground and water

• Increased stakeholder and public scrutiny

• Global economic instability

So, how can you reduce these risks and make your business more resilient?

Even though resilience is one of the biggest challenges of this century it is not a new challenge. The Earth’s climate has always been in flux. Throughout history, people and businesses have learned to cope with changing weather conditions. What has changed is the severity of bad weather events and the frequency with which they are occurring. In 2018, California had its deadliest and most destructive wildfire season ever, with more than 8500 fires recorded, which scorched nearly 2 million acres of land. This is just one of many examples of the effects of climate change. These types of events effect not only people and companies in the affected areas, they also tax insurance companies, which then raise their premiums for everyone.

What will you do if disaster strikes and your insurance policy doesn’t cover the full extent of the damage? And even if your insurance does cover the damage, how will your business prospects be affected by a long period with your factories shut down? Will your customers switch to the competition while you are getting things up and running again? What if your business isn’t directly affected but instead your critical suppliers are sidelined?

Where to focus action

Adapting to these risks might mean erecting flood barriers around factories or battening down warehouse roofs to withstand gale force winds. Some insurers state that every dollar spent on resilience enhancing measures saves five dollars in potential reconstruction costs. In our work with major industrial clients, my colleagues at Arcadis and I have identified four areas upon which companies should focus to boost industrial resilience:

• Safeguarding stores of raw materials and chemicals to protect these assets from flooding, and the potential they will pollute the environment

• Bolstering your supply chain and taking measures to use fewer resources including raw materials and energy

• Actively managing public and market perceptions of the care your business takes to ensure business continuity, environmental compliance and safety

• Properly balancing short-term and long-term needs and ambitions, so that immediate return on investment is not the sole focus, opening the door for investments in resilience, sustainability, and the overall health of your business, industry and the world.

There’s no one-size-fits-all solution to the many challenges presented by the need for industrial resilience. The steps that companies need to take are as varied as the many different types of businesses there are and the multitude of environmental and market contexts in which they operate. What we do know is that climate change and the many other risks are real, and they are rapidly changing the world around us.

The first step is to assess how vulnerable your assets and facilities are, as part of a resilience master plan. By working together, we can investigate probable scenarios and design intelligent ways to protect companies and assets so that our businesses can continue contributing to the economy no matter what the future brings. Find out more by joining me at the Amsterdam International Water Week. Arcadis is a Gold sponsor of the event which takes place during the first full week of November.

And you can learn more about industrial resilience by downloading our white paper, The business case for resilience.