by Julia Hazel and Dianna ONeill
While the dire outlook for the 2024 Atlantic hurricane season has raised alarms across the U.S., supply chain risk leaders focusing solely on this region are dealing with incomplete information.
Unlike 2023, the Pacific is expected to experience a relative reprieve from tropical cyclones this season. The complex climate dynamics impacting typhoons and hurricanes across the two oceans underscores the need for a global, seasonally-dependent assessment of catastrophic risks to supply chains.
The Looming Threat in the Atlantic
The National Hurricane Center’s unprecedented forecast is fueled by climatic conditions creating a perfect storm for intense hurricane development. However, an exclusive focus on this region alone risks overlooking critical threats to global supply chains posed by tropical cyclone activity elsewhere.
According to data from the World Bank, natural disasters in the East Asia and Pacific region caused over $60 billion in economic damages in 2021 alone, with a significant portion attributed to tropical cyclones disrupting supply chains.
Pacific Cyclones: An Underestimated Peril
In 2023, while the Atlantic saw 20 named storms, the remaining 58 tropical cyclones wreaked havoc across the Pacific and Indian Oceans, inflicting damage from China to Australia and Africa. The impacts of a single, powerful storm system can be immense:
- Typhoon Doksuri, which ravaged Beijing and coastal China in July 2023, closed major ports and destroyed critical infrastructure, triggering $25 billion in U.S. economic losses according to Munich Re.
- The technology sector has been heavily impacted by Pacific storms, with companies like Apple, Samsung, and Intel facing disruptions to their supply chains in recent years. In 2022, Super Typhoon Noru forced several semiconductor factories in Taiwan to temporarily halt operations, exacerbating the global chip shortage.
- The automotive industry has also been battered by Pacific cyclones. In 2021, Typhoon Chanthu caused production stoppages at Toyota’s plants in Thailand, resulting in estimated losses of $98 million.
Regionally Tailored Forecasts
Interestingly, while the Atlantic is bracing for a historically active hurricane season, the forecasts for other regions paint a different picture. The outlooks for the Central and Eastern Pacific call for below-normal tropical cyclone activity, with NOAA anticipating a 50% chance of below-normal activity in the Central Pacific and 60% in the Eastern.
This divergence can be attributed to the effects of La Nina, which augments hurricane development in the Atlantic but has the opposing effect in the Pacific by increasing both vertical wind shear and atmospheric stability – conditions that suppress cyclone formation and intensification.
Comprehensive Catastrophic Risk Assessment
The stark disparity in this year’s forecasts across different regions of the world underscores the importance of businesses adopting a truly global, seasonally-dependent assessment of catastrophic risks to their supply chains. The threats posed by tropical cyclones are dynamic, shifting in both space and time depending on the season, the inherent risk profile of a given location, and continuously evolving climatic patterns.
To protect against these dynamic threats, organizations must gain greater visibility into their extended supply networks, identifying key suppliers situated in areas historically prone to natural hazards like hurricanes and tropical cyclones.
Moreover, they must continuously monitor how risk patterns shift across seasons and regions in real-time, using comprehensive supply chain lifecycle risk intelligence to proactively adjust mitigation strategies:
- Interos’ catastrophic risk model provides a powerful solution to this complex challenge, offering a high geospatial resolution. This delivers more precise in-country and in-state risk indicators for faster and more focused hazard mitigation.
- The technology enables businesses to proactively assess which suppliers are in areas susceptible to different natural hazards, as well as which specific hazard risks are likely to emerge during particular seasons.
- The model’s continuous monitoring enables real-time tracking of supply chain impacts from unfolding natural events, empowering organizations to respond swiftly.
Consider the example of Cooper University Health Care. It used catastrophic risk intelligence from Interos to identify suppliers located in the path of Hurricane Idalia in 2023. By leveraging real-time catastrophic intelligence, managers were able to pre-position critical materials to ensure uninterrupted patient care.
As climate volatility and extreme weather become increasingly commonplace, embracing global, real-time hazard monitoring solutions like Interos’ catastrophic risk technology are crucial for proactively deterring and mitigating supply chain disruptions.
Click here to learn how Interos can secure your supply chain against extreme weather and other risks.
