Weather and Workforce: Employers Must Quantify the Risk

Extreme weather events and their effects on businesses are certainly nothing new. Companies have long planned for what a wildfire might do to a manufacturing plant or the damage a hurricane could do to a vehicle fleet. However, two factors have altered the way companies think about such scenarios:

1. Weather catastrophes continue to evolve and become more impactful, occurring in places they typically haven’t in the past.
2. The employer-employee relationship is changing. In recent years, employers are more concerned than ever about their employees' wellbeing and its effect on their productivity. 

Weather affects workers in several ways, some more apparent than others. People who work outside, for example, face health risks from heatwaves. Wildfires have implications for air quality that can lead to a host of health problems. But these consequences are only part of the picture. Not only can weather events affect workers’ physical health, their emotional and financial wellbeing may also be at risk.

Modeling that risk, quantifying its potential effect on specific human capital outcomes, and finding ways to keep the workforce operational despite the increasing frequency and severity of events will be crucial focus areas for companies in the years to come.

Recent Catastrophes and their Business Impact 

The recent wildfires in Los Angeles left thousands displaced, with many homes lost and more than $30 billion in losses according to Aon data. While wildfires are not new to the region, these fires were fueled by strong Santa Ana winds that spread the blaze deep into residential areas. The economic consequences of these events, and their impact on businesses' insurance requirements, are far-reaching.

Recent floods in Southern Germany (exacerbated by sea level rise and heavy rains) and in the mountains of North Carolina (caused by Hurricane Helene) have disrupted manufacturing, farming and tourism. Neither of these areas were accustomed to floods, making response efforts more difficult. 

It’s important to note, however, that weather events don’t need to be extreme or even local to disrupt a business. For example, low-lying areas where sea levels have risen, like in parts of Florida, can experience tidal flooding — that is, routine flooding when the tide cycle is at its highest. Flooded roads prevent workers from traveling to work, and flooded coastlines mean less tourism. 

Similarly, wildfires burning in one part of the continent can disrupt air travel hundreds, if not thousands of miles away. Extreme heat has also become a chronic issue in some areas, and heatwaves, which are becoming longer and more frequent, can have wide-ranging effects on workers and their families — from altering work schedules to declines in emotional wellbeing.¹

Preparing for Future Weather Disruption

Extreme weather events are likely to get worse as populations shift and the planet continues to warm. Higher temperatures lead to drier fuels, increasing the risk of wildfires, which are heightened by strong winds. Warmer oceans fuel more powerful storms. Heatwaves are expected to continue, necessitating mitigation measures — from increased use of air-conditioning (and the attendant increase in energy consumption) to forcing outdoor workers to work outside of typical daytime hours.

Beyond the human element, there are also cost considerations. Estimates from natural disasters tend to focus on the cost of repairing buildings. However, the cost of rebuilding a workforce can be just as significant.

Finding the Balance of Proactive and Reactive Measures 

Most advice companies receive is to be proactive — get ahead of issues to prevent their worst effects. But the unpredictable nature of weather events, and the fact that weather across the continent can disrupt business, requires a mix of proactive and reactive measures. 

Proactive measures should focus on modeling the risks associated with weather events to understand the types of catastrophes that could occur and their adverse outcomes. It should then consider what preventative measures can be taken to mitigate potential impact. Having a workforce that is widely geographically distributed, thanks in part to remote working, will mean employers need to account for different types of risks. But it also means there is less overall risk of being completely shut down by a catastrophe impacting a single location. 

Reactive measures, like business continuity plans, are typically associated with disaster response. One key component of these plans is to identify and train leaders who are most capable of implementing and executing them. This is especially important in the condensed decision-making timeframe often associated with major weather events. 

Taking a step back, it becomes clear that there are actually two changing climates at play for employers. First, the impact of weather on day-to-day operations and long-term strategic planning, which will continue to gain prominence. Second, is the changing workplace climate, where the support employees expect from their employers extends beyond a paycheck. Taking care of employees should be equally as important as taking care of facilities when it comes to extreme weather events. Partnering with a trusted advisor to assess and mitigate the risk will allow companies to be confident that they are, to the greatest extent possible, managing the intersection of weather and workforce.

Aon's Capabilities

¹ How heat affects the mind, American Psychological Association