More than half of APAC’s top CEOs and CFOs say their companies are underprepared for climate-related financial risks, finds FM Global
COVID-19, bushfires and floods. Businesses in Australia have had a lot to contend with this year. Yet, despite climate risk simmering in the background for APAC based businesses, more than half (58%) of the 100 APAC senior executives surveyed admit their companies are not fully prepared to address the adverse financial impact of climate risk.
Moreover, while 57% rank climate risk as a high business priority relative to other business risks, two in three senior executives (67%) believe their companies have somewhat to no control over the adverse financial impact of climate risk on their business.
The findings stem from a global survey of several hundred CEOs and CFOs at companies with $1 billion or more in revenue across a wide variety of industries in Asia Pacific, North America and Europe. The research was commissioned by FM Global and conducted by ENGINE Insights.
The majority of respondents in APAC (87%) admitted their organisations are somewhat to significantly exposed to climate risk. Bushfire (wildland fire), cyclones (hurricanes & typhoons) and drought topped the list as the three exposures that “concern their companies the most” and “could most negatively affect their financials.”
While APAC respondents admit to their companies being underprepared, 80% believe executive management of a company should be held accountable for the adverse financial impact of climate risk on their business.
“While the Asia Pacific region is better prepared than its North American or European counterparts, the findings are still concerning especially when it’s considered that in 2019, much of Australia was affected by drought and experienced a devastating bushfire season.”
“Natural disasters pose a significant challenge for APAC and combined with the challenges the pandemic has already placed on businesses – many of which are fighting to survive and recover,” said Katherine Klosowski, vice president – Natural Hazards and Structures Engineering, FM Global.
“The combination of being underprepared for natural catastrophes, volatility in financial markets, and the threat of an economic recession couldn’t come at a worse time for many companies,” added Klosowski.
The survey results build upon the World Economic Forum’s report from earlier this year, released just before the pandemic struck, that declared extreme weather events plus failure of climate change mitigation and adaptation as top risks over the next 10 years.
“Fortunately, most losses stemming from climate-related events are preventable, and loss prevention can help preserve a company’s value and resilience, especially during the pandemic,” said Klosowski.
“While it may be more difficult to prepare for such events while restrictions remain in place, it’s not impossible. Failure to prepare could exacerbate the impact climate-related events have on an already fragile bottom line.”