When undergoing risk assessment procedures, companies should account for disaster-related risks that could disrupt their production and logistics management.
Water was listed as one of four top risks businesses encounter in the 21st century by experts at the World Economic Forum this year, according to Live Mint. While flooding is one of the most obvious water-related risks, drought can also drive up costs for production. In parts of the country reporting drought, it may be difficult to produce for businesses that heavily rely on water, including certain food and beverage manufacturers.
Deutsche Bank Securities projects the recent drought impacting almost two-thirds of the continental U.S. will shrink gross domestic product growth by almost one percentage point.
The majority of companies, 53 percent, have said water risks are already affecting their business, according to a survey by the Carbon Disclosure Project. These firms report experiencing property damage, higher prices, diminishing water quality in addition to interruptions to business operations. Sustainable water management is essential as 20 percent of global GDP is made possible through production in water scarce regions.
Analyze risks using business intelligence tools
As a crucial step in the risk management process, businesses should evaluate their risks using data collection and analysis, EBN reported. This procedure helps determine financial risks and other potential disruptions. In order for businesses to respond adequately to possible disasters, companies need to be prepared for challenges ahead. As a business intelligence tool used for risk assessment, predictive analytics software can help businesses detect risks before they cause costly damage.
Predictive analytics not only gives manufacturers insight into current business performance but also allows them to forecast logistics problems. Firms are then able to identify issues that may disrupt production and disruption of goods.
Water risks are not only hazards to look out for, according to a study by the Supplier Ethical Data Exchange. This report indicates the manufacturing industry has the highest level of fire risk around the world. Manufacturers in Europe are the most at risk for factory fires while African producers are the lowest.
"Investors need to understand that such risks and hazards do not take place only in developing countries," said Mark Robertson, a spokesman for Sedex, a nonprofit that concentrates on enhancing ethical practices in business. "They must take a proactive stance and engage with companies in all areas."
Sedex said fire safety makes up 32 percent of health and safety violations for global manufacturers.