Extreme weather isn’t a “maybe.” It’s already hitting companies’ business continuity, supply chains, and bottom lines and Boston Consulting Group’s new guide makes the case that boards and CEOs need to treat weather risk as a strategic imperative, not a compliance checkbox.
The scale of the physical risk challenge
In 2024 alone, natural disasters caused at least $320 billion in economic loss across global value chains, with less than half covered by insurance. Severe floods, droughts, and wildfires are no longer episodic events in isolated corners, they are recurring disruptions with real financial consequences.
These events don’t just hurt individual facilities. A flood at a second-tier supplier can ripple into production delays, shipment failures, and weeks of lost revenue in distant markets. Water scarcity can make core inputs unreliable, forcing companies to rethink sourcing, production, and logistics entirely.
Put plainly: physical shocks threaten infrastructure, supply continuity, and workforce stability, all of which are mission-critical for business operations.
Why most companies are underprepared
Despite these risks, the BCG report finds that most companies are still in the early stages of physical-risk assessment. Many focus only on risks to their own assets, not those embedded deeper in their value chains.
CEOs are still grappling with basic questions like:
- What parts of the business are most exposed?
- How do weather shocks cascade across suppliers and partners?
- How should the company adapt its strategy, operations, and capital plans to withstand these risks?
Without fully mapping risk at the asset, value chain, and system level, resilience planning remains reactive, not strategic.
A CEO-driven framework for resilience
BCG lays out a structured approach for leaders who want to build meaningful resilience:
1. Acknowledge the threat
CEOs must first understand and articulate where physical risks lie within and beyond their own operations. That means looking past internal data and asking tough questions about suppliers, logistics networks, and external system risks.
2. Mobilize the executive team
Resilience can’t live in a silo. The report stresses the need for executive ownership, where the CRO, COO, and (increasingly) the CSO coordinate risk management, operational planning, and long-range scenario analysis.
3. Build a resilience strategy rooted in action
Resilience isn’t about wish lists. CEOs should tie resilience planning to capital allocation, evaluating:
- Financial tools like insurance, hedging, and risk sharing
- Operational shifts such as diversified suppliers or inventory buffers
- Long-term business model adjustments to reduce reliance on weather-sensitive inputs
4. Partner broadly across the value chain
Companies cannot survive physical risk alone. BCG urges leaders to collaborate with suppliers, customers, regulators, and peers to share insights, align actions, and co-invest in resilience where it matters most.
Board members can be a powerful ally
As CEOs work to strengthen resilience against escalating physical risks, the board can be a critical partner.
Directors bring a big-picture view of risk and strategy. They can challenge assumptions, apply objective oversight, and ensure resilience plans align with long-term vision and risk tolerance. Their external networks and cross-industry experience can also provide valuable insights and practical examples from other companies facing similar disruptions.
To make that partnership effective, CEOs should equip boards with:
- Regular, concrete risk assessments
- Clear analysis of potential financial impacts
- Explicit resilience goals for review and endorsement
When engaged and well-informed, the board can significantly strengthen an organization’s ability to withstand weather and climate shocks.
What this means for business resilience
The key message is clear: weather risk is no longer a peripheral concern. It’s a core strategic issue that can affect shareholder value, operational continuity, and competitive advantage.
The message isn’t punitive, it’s practical: if weather-driven disruptions can wipe out weeks of output or create systemic bottlenecks, then resilience must be embedded in strategy, governance, and capital planning.
The bigger question for leadership teams now is not whether physical risk matters, but how deeply they are prepared to embed resilience into their organizations.
What’s your company doing to ensure weather disruptions don’t become business disruptions?
Source: Boston Consulting Group
