The New Cost of Doing Business: Beating Floods, Heatwaves, and Wildfires Before They Beat You
By Robert Macnee
This post originally appeared in World Financial Review: https://worldfinancialreview.com/the-new-cost-of-doing-business-beating-floods-heatwaves-and-wildfires-before-they-beat-you/
Climate risk is reshaping the cost of business. With global catastrophe losses topping $400 billion in 2024, insurers retreating from high-risk markets, and supply chains increasingly fragile, resilience is now balance-sheet logic. Firms that map exposure, invest in risk reduction, and modernize reporting can turn this into a competitive advantage.
Climate risk has moved from the boardroom to the balance sheet. What once felt like an environmental issue is now a core question of business continuity and resilience. In 2024 the U.S. recorded 27 billion-dollar weather and climate disasters totaling roughly $183 billion; the five-year average has surged to 23 such events per year, up from a long-term average of 9. Globally, natural catastrophes produced $417 billion in economic losses in 2024 (with $154 billion insured) – reminding boards how quickly “physical risk” becomes financial risk.
Resilience planning is now part of the base cost of doing business. That’s not just a small-business view. It’s where the data point. Consider three realities shaping corporate decisions today.
1. The hazard profile is broadening—and intensifying
Globally, floods and storms remain the most common and costly natural disaster, but the risk set is widening to include longer heat seasons, more damaging convective storms, larger wildfires, and more frequent power disruptions that affect facilities and logistics alike.
Heat is proving to be a silent profit killer. Analyses from The Lancet estimates that heat-related productivity losses totaled a record 512 billion hours in 2023. In the U.S. the average heat-wave season length has increased by more than 200% since the 1960s and heat related productivity losses could reach $500 billion by mid-century without adaptation.
Wildfire is also evolving into a systemic business risk in drier climates. Swiss Re estimates that 2014–2023 wildfires caused over $100 billion in economic losses and $74 billion in insured losses. Insurers are already retreating from high-risk areas due to rising losses.
Case in point: the January 2025 Los Angeles wildfires spread across 57,000+ acres, destroyed over 18,000 structures, and forced the evacuation of more than 200,000 people. For businesses, the fallout included prolonged closures, grid instability, staffing disruptions, logistics snarls, and insurance upheaval. Estimates of total economic losses vary, but even conservative projections place them between $50 billion and $164 billion.
Flooding is disruptive, hitting unprecedented levels in many areas, and has increasingly global impacts. Pakistan’s 2025 monsoon floods submerged 1.3 million acres of farmland, wiping out key cotton and rice crops, cutting into textile exports, and pushing up basmati rice prices in the UK, Middle East, and U.S.
The message is clear: businesses must factor localized climate events and global supply chain disruptions into strategic planning, capex decisions, and operational budgets.
2. Insurance markets are signaling (and pricing) risk
The global insurance industry is experiencing a fundamental recalibration as climate-driven catastrophic losses reshape risk pricing and market structure. Insurers and reinsurers have paid more than $100 billion in natural-catastrophe claims globally for four straight years. The sector faces unprecedented financial pressure that is driving strategic market retreats and coverage restrictions..
Insurers are strategically withdrawing from high-risk areas, creating coverage deserts with profound economic implications. The response is increasingly uneven across geographies. In the U.S., insurers are retreating from California’s wildfire belt, Florida’s coastlines, and parts of Louisiana—leaving businesses facing shrinking availability, rising deductibles, and tighter sub-limits.
European markets mirror this disruption. Germany’s 2024 floods caused €2 billion ($2.4 billion) in insured losses, about €1 billion ($1.2 billion) above the long-term average. Allianz has responded by calling for risk-adjusted premiums, stricter building standards, and even considering compulsory natural hazard insurance—a signal that coverage is at risk of becoming unavailable in exposed regions.
Technological innovation offers partial solutions. Parametric insurance, satellite monitoring, and catastrophe bonds are enabling more granular risk assessment, though these cannot fully offset the capacity constraints facing traditional reinsurers.
Despite technological advances and new financing mechanisms, the move toward precise climate pricing means companies now ask ‘Can we insure it?’ before ‘Should we build here?’.
3. Markets and regulators want comparable resilience information
The International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) Standards became effective beginning 1 January 2024, establishing a global framework for sustainability and climate-related financial disclosures that mirrors the precision now driving insurance pricing models. Jurisdictions are moving to adopt or reference them, and investors are increasingly using these disclosures to assess resilience and capital allocation.
The market message is clear: quantify your climate risks or pay premium prices. Organizations with documented hazard assessments and adaptation plans are securing better rates from both insurers and lenders, while those without face mounting costs on both fronts as financial markets price climate risk with increasing precision.
Given these market realities—escalating physical risks, insurance market retreat, and regulatory disclosure requirements—the question becomes how organizations can systematically convert climate exposure into competitive advantage.
From Exposure to Advantage
Five strategic moves are emerging as pathways for organizations to use climate resilience to create competitive advantage.
1) Map exposure beyond Tier 1 suppliers. Identify assets, logistics, and vendors in risk zones. Extend mapping to Tier 2/3 suppliers where single points of failure hide. Build alternate sourcing, inventory buffers, and pre-agreed reroutes.
2) Align procurement with resilience. Give suppliers predictable terms and resilience incentives so they can adapt—reducing your downtime risk. Co-develop practical measures and integrate progress into ISSB reporting.
3) Treat mitigation as high-return capex. Natural hazard mitigation delivers strong returns: $4 saved for every dollar invested in private retrofits, according to National Institute of Building Sciences research. That’s balance-sheet logic, not feel-good spending.
4) Harden operations for heat and smoke. Build heat-response playbooks covering shift timing, cooling protocols, air quality sensors, and backup power. Preparedness for these events can reduce productivity losses.
5) Modernize disclosures to lower cost of capital. Operationalize IFRS S2 with hazard maps, quantified continuity plans, and physical-risk financials. Organizations that credibly quantify resilience secure better rates from lenders, insurers, and investors.
Why this matters for the broader economy
When small businesses fail after disasters, local economies value chains are significantly weakened. Small enterprises represent 90% of businesses and 50% of employment globally, yet public resilience funding typically bypasses them. The strategic response is partnership: corporate anchors that co-invest through faster payments, shared capital, or resilience-linked contracts reduce network fragility while protecting their own operations.
The winners will be those who quantify exposure, invest where the NPV is positive, enable suppliers to adapt, and disclose credibly against global baselines. That combination turns resilience from a cost center into a competitive moat. In an era of $400 billion-plus annual catastrophe losses worldwide, it’s not just prudent—it’s the new cost and benefit of doing business.
About the Author
Robert Macnee, PH.D. is a climate strategist and communicator who helps make preparedness practical. He has developed guides, toolkits, and public engagement campaigns for governments and nonprofits across the U.S., Europe, and East Asia. As Deputy Director at Climate Resilience Consulting. Robert specializes in making resilience accessible—using clear language, real-world examples, and a deep understanding of what small businesses need to weather the storm and stay strong. He is the co-author of the forthcoming book, The Resilience Advantage: A Small Business Guide to Preparing for Floods, Heatwaves, Wildfire, and Other Climate Disasters (September 2025).