Is Your Business Ready?
In Short
Climate-related disasters are becoming increasingly common and their impacts exceed what an insurance policy can cover. However, Quebec businesses could benefit from enhancing their organizational resilience. Here’s what a structured approach can help you achieve.
- Identify your organization’s critical dependencies and vulnerability.
- Draw up continuity plans to remain operational in the event of a crisis.
- Develop contingency plans before incidents occur.
- Secure your supply chain against disruptions.
- Incorporate resilience as a standalone governance issue.
- Involve the management team in testing your plans using simulations.
Contents
“The key is to ensure that your business can continue to operate even if it is affected by a disaster or a crisis.” – Laëtitia Fière, Senior Manager[CW1] , Management Consulting, ESG Strategic Advisory Services, RCGT
Climate-related disasters are becoming more frequent and more severe. Having good insurance coverage is no longer enough: you must also be able to continue your operations when crisis strikes.
Risk management has long been based on a relatively simple equation which involves pinpointing threats, taking out sufficient insurance coverage and resuming activities following an emergency. However, this logic is now being put to the test. Extreme climate events are increasingly frequent, intense and costly. Their consequences go far beyond material damage and impact supply chains, labour, infrastructure and even the operational viability of certain organizations.
In 2024, insured damage caused by severe weather events across Canada totalled $8.5 billion,1 which is nearly 12 times the annual average recorded in the decade between 2001 and 2010. More than 228,000 insurance claims related to natural disasters were submitted in July and August.2 In Quebec, the remnants of Hurricane Debby alone caused $2.7 billion in insured damages,3 which is a provincial record.
Faced with this reality, the question is no longer knowing whether your business has adequate insurance coverage, but whether it’s resilient. Resilience involves anticipating disruptions, maintaining essential operations and recovering quickly following a climate-related disaster, cyberattack, supply chain disruption or geopolitical crisis.
Climate risks: what do the international markets reveal?
In Quebec and Canada, ESG factors are not yet a formal underwriting criterion for most damage insurance providers. However, elsewhere in the world, and as evidenced by the transformations currently underway, the insurance industry is already adapting to the new reality.
In Europe, the European Insurance and Occupational Pensions Authority (EIOPA)4 is actively engaged in integrating climate risk into the requirements for insurance providers. Large international players such as AXA5 and Allianz6 have already modified their policies to exclude certain fossil fuel-related industries. In California, certain insurance providers have suspended coverage in zones that are deemed high-risk wildfire areas,7 while, in Florida, some providers have withdrawn from the market following severe hurricanes8 that swept across the region.
We should bear in mind that this is not the case in Quebec, but the changes clearly reflect the direction the industry is taking. Investors, financial institutions, insurance providers and clients now expect organizations to demonstrate their ability to manage both climate and operational risks. Against this background, resilience is becoming a tangible indicator of ESG maturity and a means of increasing your business partners’ trust in you.
How will insurance and climate resilience affect your business?
Insurance coverage can help you to offset certain financial losses, but it can’t instantly replace a valued supplier or rebuild a disrupted supply chain. Furthermore, insurance cannot prevent the loss of clients after several weeks of interrupted operations. Insurance acts as a safety net, while resilience involves maintaining an organization’s essential functions and accelerating the return to normal operations following a major unforeseen event.
Recent weather events in Quebec also illustrate this point. A manufacturer whose plant is flooded may be forced to halt operations for weeks on end, regardless of whether they have comprehensive insurance coverage. A transportation company could hit a roadblock if its highway corridors become unsafe. A tourist establishment might lose an entire season’s profit following a summer of natural disasters. In each of these scenarios, delivery delays, lost clients and missed business opportunities can have a long-term impact on an organization’s performance and economic viability.
Now is the time to change your perspective and not focus on whether a crisis will happen, but rather how you’ll get through it.
The most vulnerable sectors
While all businesses could be impacted, certain sectors are particularly vulnerable to climate-related and operational disruptions, such as:
- construction;
- agriculture and agri-food;
- transportation and logistics;
- tourism and accommodation;
- forestry;
- manufacturing;
- mining and natural resources.
Within these business sectors, even a few days of downtime can quickly lead to lost contracts, rifts in relationships with strategic clients or a series of delays that can’t easily be reversed. If you operate in one of these industries, it’s important that you draw up a business continuity plan to ensure uninterrupted operations.
Five strategies for boosting your company’s resilience
1. Take stock of your vulnerabilities
First and foremost, organizations must identify their critical dependencies, such as strategic assets, infrastructure, suppliers, key personnel and digital systems. A failure to map these elements can lead to multiple blind spots.
2. Prepare a business continuity plan
The best-prepared companies are those that document the critical processes that must be maintained in the event of a crisis, and plan the resources needed for a fast recovery.
3. Outline contingency scenarios
What would happen if you couldn’t access your primary plant? If a key supplier ceased its operations? If a power outage lasted several days? If a cyberattack paralyzed your critical systems? Resilient organizations ask these questions before such events can occur, rather than while they’re happening.
4. Secure your supply chain
The disruptions that we’ve witnessed in recent years have demonstrated that a single defaulting supplier can jeopardize an entire operation. Diversification and mapping critical suppliers are no longer merely optional best practices. They are strategic tools.
5. Turn resilience into a governance priority
In the same way as finances, investments and growth, resilience must be discussed. In particular, you must determine the percentage of operations covered by your business continuity plan, the maximum tolerable downtime, the actual recovery time following an incident, the proportion of critical suppliers that have been assessed and the level of asset exposure to climate risks.
The ultimate test: questions every business leader should start asking themself
An untested plan is no more than a hypothesis. The best way to assess your level of preparedness is to ask yourself the five questions below and give honest answers.
- How long can my organization suspend its operations before recording significant losses?
- Do we know who our critical suppliers are?
- Have we documented our contingency[CW3] plans?
- Have we tested our business continuity plan in the past 12 months?
- In the event of a crisis tomorrow, who makes the decisions?
Unless you can provide definitive answers to these five questions, it’s time to take action.
How can RCGT support you?
Enhancing organizational resilience is not a project you undertake on your own. At Raymond Chabot Grant Thornton (RCGT), we believe that resilience will become a major competitive advantage for Quebec businesses over the next decade.
Our Environmental, Social and Governance (ESG) team guides you so that you can cope with the unexpected and bounce back quickly. In practical terms, we help you to:
- Carry out impact assessments on your operations;
- Draw up business continuity plans tailored to your specific circumstances;
- Develop contingency and crisis management plans;
- Run crisis simulation exercises with your management teams and board of directors;
- Integrate resilience and climate risks into your corporate strategy.
Contact our ESG Strategic Advisory specialists today to schedule a no-obligation exploratory meeting.
1 Insurance Bureau of Canada (IBC)/CatIQ, January 13, 2025 newsletter - https://www.ibc.ca/news-insights/news/2024-shatters-record-for-costliest-year-for-severe-weather-related-losses-in-canadian-history-at-8-5-billion
2 Insurance Bureau of Canada (IBC) - https://www.ibc.ca/news-insights/news/the-costliest-severe-weather-event-in-quebec-s-history-august-flooding-caused-nearly-2-5-billion-in-insured-damage
3 Insurance Portal, January 2025 - https://portail-assurance.ca/article/les-sinistres-climatiques-ont-coute-plus-de-85-g-en-dommages-assures-en-2024-au-canada/
4 EIOPA Annual Report 2023 - https://www.eiopa.europa.eu/document/download/f65e22f2-ae86-4b3d-a83a-270c483c1662_en?filename=eiopa-annual-report-2023-corrected-edition.pdf&prefLang=fr
5 AXA: https://www.axa.com/en/news/emergency-exit-committing-to-coal-phase-out
7 Atlas Magazine, California’s insurance crisis - https://www.atlas-mag.net/en/articles/californias-insurance-crisis-0
8 CBS News, AAA pulls back from renewing some insurance policies in Florida - https://www.cbsnews.com/news/aaa-insurance-policies-florida-nonrenewal/