Analyst Insight: Extreme weather events are increasing in frequency worldwide, posing significant risks to human health, business operations, supply chains, and the global economy. But companies can take steps to enhance supply chain resilience and mitigate disruptions.

Research has identified extreme weather as the second-greatest risk to global business operations in 2025, yet many companies remain unprepared for its impacts.

As weather-related incidents grow in frequency and intensity, organizations must adopt proactive strategies to safeguard their operations and build climate resilience. 

Assessing Climate Risks

Understanding and mapping where and how extreme weather could disrupt your supply chain is the first step in building resilience. Many companies lack visibility into climate risks affecting suppliers, transportation routes and warehousing facilities. Without this knowledge, they could be caught off-guard by climate-related disruptions.

Companies should consider conducting a climate risk assessment to identify suppliers, logistics hubs and critical infrastructure vulnerable to extreme weather, as well as working with suppliers to develop joint risk management plans.

Diversify Supply Sources and Routes

Reliance on single supply sources or concentrated geographic regions can magnify the impact of localized extreme weather. In addition, long supply chains are particularly vulnerable to climate disruptions that often cause significant variations in lead times.

To mitigate these risks, companies should consider setting up just-in-case inventory buffers to mitigate disruptions to climate-sensitive supply routes; diversifying their supplier networks and logistics pathways; and shortening their supply chains through near-shoring or onshoring where feasible. 

These strategies will nevertheless incur a cost, meaning that a risk/benefit analysis may be needed to determine to what extent they’re worth pursuing.

Collaborate with Stakeholders

Climate events — from extreme heat and flooding to hurricanes and droughts — create widespread disruption that requires coordinated responses from businesses, governments and communities. Companies that collaborate with other stakeholders will be better able to anticipate disruptions, share risk mitigation strategies, and implement effective adaptation measures.

To strengthen resilience, businesses should partner with governments and industry groups to stay ahead of regulatory changes, infrastructure investments and climate adaptation policies, while also collaborating with investors, academics, local communities and other businesses to gain insights into future risks and opportunities.

Use Digital Technologies

Digital tools, particularly those driven by artificial intelligence (AI), offer real-time insights into potential disruptions caused by extreme weather, enhancing predictive capabilities and response times. AI-driven analytics can support every stage of the risk management procedure, minimizing economic losses from climate events.

Businesses should implement real-time climate monitoring tools to track potential disruptions, use predictive analytics to forecast risks and optimize transportation routes for efficiency, and explore automated response systems that dynamically adjust supply chain processes in reaction to climate disruptions. 

As extreme weather events become more disruptive to supply chain operations, the importance of climate proofing is increasing. Adapting to climate risks is no longer optional; it is a business imperative. By assessing climate risks, diversifying supply sources and routes, collaborating with stakeholders, and using digital technologies, companies can build supply chains that are not only resilient to extreme weather events but also better prepared for the broader challenges of climate change. The time to act is now.