Beyond off-the-shelf software: Managing risk from changing weather patterns

As extreme weather events—heat waves, floods, droughts, and wildfires—become more frequent and severe, companies face growing pressure to understand and manage their exposure to these risks. Proactively weaving these changing weather patterns into corporate strategy isn’t just about protecting assets: it’s about minimizing financial risk before disaster strikes.

Wherever your organization is on its journey to identify and manage extreme weather risks, there’s always room to improve how you assess, price, and mitigate risks across your assets.

Estimating potential financial consequences of extreme weather

Many companies (especially those with big, geographically dispersed portfolios) start the process of assessing changing weather-related risks by mapping their risk exposure.

A wide range of commercial off-the-shelf (COTS) tools are available to help companies do just that. These platforms typically integrate data on changing weather patterns with simple impact models. The impacts are then translated into potential financial consequences. Some also factor in adaptation costs and benefits.

Advantages of using COTS tools include:

• Cost-effective for initial screening or compliance reporting
  These tools are often a budget-conscious way to develop preliminary risk assessments or to meet regulatory requirements. Some companies purchase multiple tools and average their outputs to bracket uncertainty.
• Outputs that can be integrated into financial models and disclosures
  COTS tools typically generate standardized outputs that can be plugged into financial models, investor reports, and compliance documentation. This integration supports consistency in risk disclosures, which is increasingly important under regulations like California’s climate disclosure law.

Disadvantages include:

• Methodologies vary widely, especially in modeling detail
  COTS tools vary widely in methodology, sometimes producing conflicting results for the same asset. This inconsistency, combined with the lack of industry standards, makes it difficult for companies to rely on these tools for high-stakes decisions.
• Underlying assumptions are often opaque, limiting transparency
  All COTS solutions operate, to some degree, as black boxes: offering outputs without clear explanations of all of the algorithms, assumptions, or data sources behind them. This lack of transparency can hinder a company’s ability to understand the results, which is critical for effective risk management.

The takeaway? Ultimately, COTS tools are best suited for companies needing broad, fast, and low-cost assessments—particularly when decisions are not being made directly from the results.

Tailored insights drive strategic decision-making

If off-the-shelf tools don’t provide the depth or clarity you need, a tailored approach can deliver actionable insights specific to your portfolio.

Weather risk is deeply context-specific. Asset-level details—like building design, crop type, or the specifics of a utility—can dramatically shift exposure. Off-the-shelf tools often gloss over these nuances, while strategic and tactical planning demand a clearer lens.

Expert analysis can create that clarity by looking in detail at the specific context and configuration of an asset to create a much more accurate understanding of the risks that are faced. Our experts base their analyses on the best available science, such as from ICF’s ClimateSight tool, to create custom scenarios and risk analytics.

Rather than an off-the-shelf widget, we’re incorporating company-specific details in a bespoke, decision-informed way to create actionable knowledge. And we don’t just customize extreme weather hazard information. With ClimateSight, we also tailor how we assess the impacts and outcomes of those hazards. This helps us build more accurate, probability-based risk assessments.

Why it matters: Benefits of the strategic decision-making approach

Expert analysis together with best-in-class data analytics helps companies like yours move from awareness to action: evaluating resilience, designing solutions, and interpreting uncertainty in ways that COTS tools simply can't. This is crucial for sustaining and growing profits as risks from weather extremes grow.

For large, complex portfolios, a strategic approach with insights from expert analysis provides the greatest benefits:

• Added depth and context
  Expert insights clarify assumptions and confidence levels, making risk data truly decision-ready. Tailored services provide the necessary guidance to help companies make sense of the available tools and design an effective approach for understanding their unique weather risks.
• Multi-layered analysis
  Experts help companies interpret uncertainty, align weather risk insights with their decision-making processes, and evaluate second-degree effects (e.g., infrastructure dependencies, insurance availability, and municipal resilience). This layered analysis is essential for capturing the full scope of weather risk.
• Investment clarity
  The goal isn’t just reporting—it’s guiding smart investments, adaptive strategies, and operational choices. By layering extreme weather risk with analyses across market, regulatory, and other business sectors, expert-led approaches deliver clarity where it matters most: the bottom line.

The commercial risk landscape is evolving rapidly, driven by a combination of regulatory changes, market dynamics, and increasing awareness of severe weather impacts. While COTS tools have merit, the real added value comes from expert guidance in navigating these tools and supplementing them with contextual analysis that considers broader systemic risks.

By integrating risk into your strategy, you can not only reduce losses and operating costs but also identify new opportunities for growth. Whether you are with a multinational company, a local utility, or an investment firm, we can help you navigate changing extreme weather risks and chart a path toward increased resilience, no matter what the forecast.