To address growing climate risks, businesses will have to set aside an increasing share of their cash flows. Hurricanes, wildfires, and the rise in sea levels impose costs on firms, both in preparation and response to these disasters. As the risks grow, those costs are only going to increase over time.
As Climate Risk Grows, So Will Costs for Small Businesses
Lessons in risk management based on research on Texas businesses affected by Hurricane Harvey.
August 16, 2022
Ernesto r. Ageitos/Getty Images
Summary.
As climate risk rises, businesses of all kinds are going to have to devote more of their budgets to preparing for and responding to disasters. Investing in risk management can help offset these costs, but many businesses, particularly small businesses, might not have the financial flexibility to do it. In August 2018, the authors surveyed 273 businesses affected by Hurricane Harvey (and assessed the credit reports of 5,000) after it hit Southeast Texas in 2017 to see how they responded. Using this data, the authors shed light on the long-term implications of disasters for businesses, and share lessons for policymakers and business owners on how best to prepare firms for future risk.