Whilst many waterfront businesses often benefit from tourism, many simply service their local community from a great location. Putting aside your target audience and your superb location for the moment, have you considered the damage your business may suffer from climate change?
This is an issue that many SMEs might not have considered, but sooner or later, it’s going to become a problem that can’t be ignored. The rising costs of real estate and the upward spiral in waterfront leases, particularly in popular coastal suburbs, is something that many businesses have struggled with for years, but it may soon become much worse.
The issue of rising oceans is a problem that may soon face many waterfront businesses, placing their operations at significant risk. SMEs may well need to face the dual disaster of losing both their physical store, restaurant or retail outlet and a shortage of customers (whether tourists or locals), as people relocate to less risky suburbs.
What can coastal businesses expect?
Extreme weather events, storms, bush fires, erosion, dangerous tides, unseasonal flooding and storm surges are all potential results of climate change. This means that SMEs in coastal or waterfront properties need to prepare themselves for greater risk and uncertainty, likely involving relocation, more expansive insurance cover and even alternate revenue models.
The risk of rising oceans has been highlighted by Coastal Risk Australia who have produced maps based on what we might expect in coastal areas from climate change and it doesn’t paint a pretty picture. With rises of 2 metres or more, coastal businesses in areas such as Byron Bay, Hobart, Melbourne’s Southbank, Perth, Port Douglas, Noosa and the Gold Coast may well be forced to relocate inland, simply because their location has become inundated with seawater.
Due to lower asset values, reduced trade and the costs of relocation, these disasters would put many waterfront or coastal SMEs in financial strife, making it next to impossible to recover from the aftermath of climate damage.
How to manage these climate change risks
Whilst governments and scientists are continuing to study climate change and the damage that it may cause to coastal and waterfront businesses, insurance companies are also researching how these changes will effect their risk assessments and coverage going forward. It goes without saying that as the damage from climate change increases, insurance providers need to find new ways to calculate these risks without disadvantaging their clients.
The unpredictability in weather patterns will undoubtedly prove a challenge to the insurance industry, but progress can be made if SMEs and providers work together to find a workable solution that benefits both parties.
SMEs can work towards lowering their carbon footprint, increased sustainability and if they are in vulnerable locations, ensure the effects of climate change is in your risk management plan. On the other hand, insurance providers are investigating innovative ways to use big data that will help to fine tune their risk assessments, as well as build increased resilience across their industry.
To decide what type of insurance policies are suitable for your business talk to an insurance specialist today.