How much economic effect can the weather have on your business? Is the weather one of the elements of consideration for risk management in your organization’s most recent business impact analysis? What research information is available to assist an evaluation of this potential threat to your organization?
New research indicates that routine weather events such as rain and cooler-than-average days can add up to an annual economic impact of as much as $485 billion in the United States. The recent study, just posted on the Homeland Security Newswire (HSNW) website and led by the National Center for Atmospheric Research (NCAR), found that finance, manufacturing, agriculture, and every other sector of the economy is sensitive to changes in the weather. The impacts can be felt in every state. “It’s clear that our economy isn’t weatherproof,” says NCAR scientist Jeffrey Lazo, the lead author. “Even routine changes in the weather can add up to substantial impacts on the U.S. economy.”
It is also important to note that the authors caution that the study should be viewed as an initial estimate, which they plan to refine in subsequent research. Lazo and his colleagues did not calculate additional costs associated with extreme weather events, such as this year’s tornado outbreaks, since data on extreme events were not available for the time period covered by their economic model. Nor did they evaluate the possible impacts of climate change, which is expected to lead to more flooding, heat waves, and other costly weather events. In other words, the economic risks would be economically a higher risk than the quoted $485 billion in the U.S. alone.
In this study, Lazo and his colleagues combined historical economic data with economic modeling techniques to produce a detailed analysis of the U.S. economy’s sensitivity to temperature and precipitation. As a result, the study was able to look at weather influences on particular economic sectors and produced the following subjective estimates of overall weather impacts: mining (14%), agriculture (12%), manufacturing (8%); finance, insurance, and retail (8%); and utilities (7%). In contrast, wholesale trade (2%); retail trade (2%); and services (3%) were found to be least sensitive.
To read this HSNW report, click here, and to read an additional report on this topic that was posted on the University Corporation for Atmospheric Research website, click here.
If applicable, you may want to pass this information along to those business continuity planning, disaster preparedness and risk management team members in your organization.
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