From the July-August 2008 issue of Treasury & Risk magazine

Respecting Mother Nature

The recent flooding in the Midwest and looming threat of hurricanes on the East Coast and in the Gulf of Mexico this summer highlight the need for companies to get a better handle on how to manage risks caused by changing weather patterns. In fact, 82% of senior finance executives and risk managers surveyed in a new study reported that they believe global climate change will require changes to their business models, according to CME Group and Storm Exchange. About 60% said the impact of weather-related risks on their businesses could be "significant" or "severe." The study included 205 senior-level finance professionals in mid-to-large size companies in such weather-sensitive industries as energy, retail, and construction.

But there are steps executives can take to manage weather risk, according to Paul Walsh, chief strategy officer at Storm Exchange, a New York City-based electronic weather risk exchange. The first one is understanding and measuring the impact that changes in weather can have on a company's lines of business and the bottom line to be able to prepare more effectively for whatever happens. That can mean anything from the effect of flooding on crops to the impact of a warmer-than-usual winter on sales of heavy coats.


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