Disasters are on the rise. Why? Well, as per our last installment on talent, we are going to be expounding the pounding and giving you tips on reducing the risk.

Expounding the Pounding

As climate change has intensified, the number of natural disasters has risen sharply. Between 1980 and 1999, we experienced roughly 4,200 disaster events. Between 2000 and 2019, we experienced roughly 7,300 for an increase of roughly 75%.

Many of these were quite significant. According to the NOAA National Centers for Environmental Information, between 1980 and 2024, the US alone sustained 403 weather and climate disasters where overall costs and damages exceeded $1 Billion dollars (when CPI was adjusted to 2024) (Source: NCEI). The total cost of these events for the US has exceeded $2.9 Trillion dollars and resulted in 16,941 deaths.

Moreover, while the overall average frequency of Billion dollar weather/climate disasters over the last 45 years is 9, the average over the last 5 years is 23! In other words, natural weather/climate disasters are coming harder and faster than ever before (and the pace is still increasing).

If we turn our attention to the United Nations Office for Disaster Risk Reduction and review their 2025 Global Assessment Report on Disaster Risk Reduction (GAR), they found that while the direct costs of disasters averaged $70 Billion to
$80 Billion a year between 1970 and 2000, between 2001 and 2020 the costs ballooned to between $180 and $200 Billion a year and that disaster costs now exceed $2.3 Trillion ANNUALLY. Let that sink in. The global cost of natural disasters is now so great that only seven (7) countries have a GDP that exceeds that cost. In other words, the cost of these disasters, of which we now experience almost 400 a year (as the Emergency Events Database recorded 393 natural hazard related disasters in 2024, see ReliefWeb) exceeds the GDP of Russia, Canada, and Italy!

You’re going to be impacted by a natural disaster in the very near future to some extent. In most first world countries where a survey has been done the results are consistent: Four (4) out of Five (5) corporations agree that natural and climate disasters hurt because they were impacted in the last 5 years. Moreover, with the rapid rise in disasters your chance of not being impacted by a natural or climate disaster in the next 5 years is trending down to 10%. In other words, your chance of being impacted is 90%. It’s beyond the point that you have any chance of being one of the lucky ones. As per a 2023 Forbes article based on an Allianz Global Corporate & Specialty (AGCS) report, natural catastrophes are the largest driver of corporate insurance losses in the US because luck can’t save you now!

And we haven’t even started to talk about man-made disasters due to bad design, bad construction, bad maintenance, or just bad negligence that can result in entire skyrises being lost, manufacturing districts going up in smoke, ports exploding, entire swaths of land becoming unavailable due to nuclear meltdowns, global pandemics due to bacterial and viral leaks from research labs, and so on.

Reducing the Risk

Insurance

Do not, we repeat, do not forego the insurance! You will need it. However, unless you can prove you are employing best practices across the board this could be expensive. So you also need to employ a number of other best practices to make the insurance companies happy. (Although their Ren & Stimpy days are over. No more happy, happy, joy, joy because gone are the days when they only take in and never pay out.)

Third Party Vetting

Think those third party risk management / third party compliance management (TPRM/TPCM) solutions are a nice-to-have that you can wait on? Think again. You need to vet every supplier, every carrier, and every partner involved in the delivery of your goods from the factory to the store (and every warehouse, port, and transfer point in between). You need to prove you did your best to ensure only legitimate actors were in your supply chain so that you have some recourse (with insurance) when the shipment gets damaged or disappears (and to make sure you can afford your insurance premiums).

Overall Risk Vetting in Source Selection

Before you select a supplier as your chosen source of supply, you need to understand the 360-degree risks which are not just the supplier risks of financial stability, compliance, quality, human rights, and so on, but the risks related to its geolocation(s). Are there tensions between the country you are operating in and the country the supplier is operating/producing in that could lead to sanctions? Is there unrest that could lead to border closings due to uprisings? Is the area prone to natural or climate disasters that have been increasing in frequency in recent years? Etc. If the overall risk is high, and there is another supplier of comparable (which could mean slightly higher) cost that is considerably less risky, then you should be choosing the alternate, slightly higher, cost supplier.

Shipment Tracking / T(I)MS

You need to be tracking all of your shipments, and, preferably, have a Transportation (Information) Management System (T(I)MS) that integrates with your carriers. At the very least, you need to know when a shipment reaches each stop and then sets out for the next stop in the chain and know where it should be at all time. If the cargo is very high value or the carrier is a common target of criminal organizations because of what they typically carry (and that includes items like cell phones, laptops, and gold bars), then you need to ensure that the shipment is tagged and the truck, container, etc. is sending real time cellular signals at all time, that the carrier is monitoring their systems 24/7/365, and if a shipment ever goes dark for more than a few minutes or too far off course, and the driver cannot be immediately reached, law enforcement is immediately engaged. Unless, of course, you can afford to have 40 Million disappear! (A 40 foot shipping container can hold 44,000 iPhones. High end i-Phones are all 1K (or more) a pop. Do the math.)

In our first series inspired by the latest and greatest CPO Survey that was just published by Deloitte, with the help of Spend Matters, which was designed to highlight, among other things, the latest and greatest “observations, challenges, and trends” in Procurement (and which included many survey results across enterprise priorities, focus, barriers to success, strategies, technologies, risks and competency gaps) we narrowed in on the top barriers to success that were common across all of the surveys and studies done by the big consultancies over the last five years. We presented you with a brief history, defined the core problem, and presented you with one more necessary realizations you need to make if you wish to make progress against the barriers.

In this series we will be tackling the risks, where we will be expounding on the pounding you are taking as a result of the risk as well as giving you some tips to reduce the risks. However, like the last series, in this series we will not be diving deep into the process upgrades or technological underpinnings you will need to adequately address them for the reasons discussed in the last series. Our goal is to give you the understanding you need to understand why the risks never change (and what realizations you first need to make if you want any hope of progress against them.)

Expounding the Pounding

As per one of our barriers to success on the talent gap in our first series, there is a talent gap which grows every year. This makes the loss of critical talent a major risk for many corporations who may only have one or two senior specialists capable of doing a specific, sophisticated, task that is vital to the organization. Especially when all of their organizational peers are in the same boat and there is a lack of replacement talent in the market.

This is especially true in sectors like manufacturing. As a result of decades of outsourcing and offshoring, and a lack of focus in the American (manufacturing) economy for decades, the number of senior, experienced resources in factory design and shop floor management is at an all time low and about to rapidly decrease in the next five years with the average manufacturing shop owner in the US being at least 62 years old. Let that sink in. A study by Crain’s Grand Rapids in 2021 found the average age four years ago was 62 and 70% of manufacturing business owners were over 59. (And America wants to bring manufacturing back? We applaud the vision, but we’re not sure how!)

Reducing the Risk

Unfortunately, in some industries, there is no way to reduce the risk. The talent is aging (rapidly) and the replacement pool is shrinking. (And with immigration being tightened in most countries, and forced deportations of all non-citizens in others, you can’t import the talent either.) The risk is only going to increase no matter what you do.

Therefore, you need to take steps to prepare for the inevitability and prepare your own critical talent (and ensure you have compensation programs and advancement opportunities in place that will make them want to stay once you embue them with the skills and knowledge they need).

In order to mitigate the risk to the extent possible, you need to do the following:

1. install proper Knowledge Management Systems (KMS) and capture as much knowledge as you can from senior employees, document and institutionalize their processes, and capture their decisions and recommendations over time in the context of real world situations
2. hire recent graduates or trainees with promise (and, preferably, not from business or procurement or operations backgrounds but from appropriate STEM (or Legal for contract negotiations) and have them mentored by a senior employee for at least a subset of the employee’s current role
3. create, or (co-)sponsor, your own training programs (either internally or with partner educational programs) to ensure your next generation of talent is properly trained

That’s where you start. In our next post we will move onto the next major risk.