Climate risk management for a resilient business future
July 16, 2025
Key takeaways
- Facing today’s climate realities requires businesses to replace outdated practices with forward-looking risk strategies.
- Climate risk modeling helps businesses identify current and future risks, covering traditional risks tied to evolving low-carbon economies and physical risks from extreme weather.
- Outsourcing climate risk modeling to SaaS-based providers can help businesses meet ESG compliance, assess financial risks and develop strategies to mitigate climate impacts, helping to ensure long-term sustainability.
The reckoning that environmental scientists have been forecasting for decades is no longer in the distant future. It’s here, and it’s here to stay, until otherwise addressed.
Climate change is in the wildfires that recently spread with speed and intensity across southern California, such that traditional mitigation efforts never had a chance to keep up with the flames. Climate change is in the hurricanes that are knowing shorter and shorter off seasons. “Boil the ocean” is now as much a literal term as it is an idiom confined to business contexts. And climate change is in the rising tide of floods that strike year-round.
No region is immune to the effects of global warming, so no businesses are safe from its unpredictable reach. To make matters worse, the present business-as-usual approach is not only outdated; it’s also unsustainable. Instead, to survive and grow, these firms will need to pivot to active climate risk management.
Identifying climate risks
The first step in the climate journey for corporations is to identify extreme weather risks that impact their specific organizations – a task that’s unfamiliar and perhaps intimidating to most of them.
Climate risk modeling allows corporations to determine their present exposures and offers a glimpse into what risks they may face in the future, so they can plan accordingly. Everything hinges on the ability to grasp complex scientific principles and transform them into workable models that can assess the financial impact that extreme climate events can have on short and long-term operations. Climate risk modeling covers the “transition risks” corresponding to firms’ evolution to a more low-carbon economy and “physical risks” resulting from extreme weather events.
Transition risks fall under the following categories:
- Policy and legal
- Technology
- Market
- Reputational
Sectors impacted by physical risks include:
- Agriculture
- Leisure
- Construction
- Retail
- Pharmaceutical
- Manufacturing
Satisfying compliance requirements and more
With unusual weather patterns rapidly becoming the norm rather than the exception, public companies are also confronting mounting pressure across the globe to comply with new environmental, social and governance (ESG) regulatory reporting requirements on their financial risks. Locating the correct data can be tricky. If this is you, you’re not alone. According to a recent survey, over half of today’s business leaders have difficulty understanding ESG reporting standards.
Locating and compiling this data has benefits that extend far beyond compliance. These statistics can be repurposed to offer insight on climate risks’ potential financial impact to your business, including on supply chains and facilities. Corporations can then use these analytics to become more environmentally sustainable and develop strategies to reduce their exposure to extreme weather. This may include protecting buildings by upgrading to more storm-resistant materials, incorporating extra flood protection at the design phase or relocating sites away from high-risk areas.
Outsourcing climate risk modeling
While catastrophic climate events can’t always be predicted, anticipating them can mitigate their effects. Acting proactively by undertaking climate risk modeling could save your business. So, consider prioritizing this proven business-management tool before it’s too late. Your company’s fate could be as close as the next wildfire, hurricane or flood.
Modeling physical risks can be a challenge for corporations. It requires a proficiency in climate science and risk management technology that few firms possess, or even have the time, skill and resources to develop.
Fortunately, corporations have a viable option. Outsourcing their modeling projects to providers that possess SaaS-based solutions and services capable of quickly managing and computing data can satisfy compliance requirements and estimate the financial risks of climate change.
How to measure and mitigate the costs of climate change
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