Violent political conflict is just one more scenario that chief financial officers will need to factor into their financial forecasting and risk management. There is also overwhelming evidence of the effects of climate change and the need for urgent action by governments and businesses.with researchers from Imperial College, Nova University in Lisbon and the University of Zurich, we explore how rising global temperatures affect businesses in the US.
The drop in revenue is mostly explained by lower labour productivity and ability to supply goods when temperatures are higher, as well as limited capacity to adapt to changes in temperatures when firms also face financial constraints. Today, CFOs must factor in a much larger range of risks and outcomes deriving from local problems and global disasters such as a pandemic. A decade ago, few businesses would have been exposed to cyber attack, the disruption of global supply chains or an international energy emergency as a potential crisis for them, whereas now it is a sober reality for most companies.
Managers in these countries had to learn how to quickly adapt their operations, management and financial practices to work around challenges as varied as violent political conflicts, high inflation or institutional voids.