El Niño may expose hidden flaws in your company’s asset management, requiring a review of insurance policies and inventories to prevent multimillion-dollar losses from extreme weather events.
The imminent arrival of a potentially severe El Niño sheds new light on the importance of business preparedness for climatic events. Beyond weather forecasts, experts in industrial asset management warn of a growing risk: the disconnect between the true value of a company’s assets and the protection offered by insurance and inventories. In a scenario of accentuated climate change, negligence in this area can result in significant financial losses.
For years, industrial assets were viewed as a static snapshot, with machinery, facilities, and equipment simply recorded and insured. However, the dynamic nature of operations—with replacements, expansions, and the incorporation of new technologies—creates a gap between physical reality and documentation. This discrepancy, often imperceptible during normal times, can dramatically surface with the occurrence of claims caused by extreme weather phenomena such as floods and gales.
The Disconnect Between Value and Protection
The current scenario, marked by forecasts of an exceptionally strong El Niño, intensifies the urgency of this discussion. Agencies like INPE and INMET indicate a high probability of extreme climatic events between September and November, with above- or below-average rainfall in different regions of Brazil. NOAA, in turn, raises the alert level, predicting one of the most intense episodes since 1950. For the industrial sector, this translates into risks ranging from operational interruptions to infrastructure destruction.
The central issue, for Fernando Mello, CEO of Saraf Controle Patrimonial, lies in a company’s ability to know the exact value of what it stands to lose.
An industry is a living organism. If asset management doesn’t keep pace with this cycle, a company might have one physical reality, another accounting reality, and eventually a third considered for insurance purposes. The problem is that this discrepancy can remain silent for years and only emerge precisely when a claim occurs.
Mello explains that this vulnerability exposes a risk not visible on the daily balance sheet, but one that can materialize into substantial losses.
Insurance Needs to Go Hand-in-Hand with Asset Management
Asset management should not be treated in isolation from the contracting or renewal of insurance policies. It is fundamental for companies to have in-depth and up-to-date knowledge about the assets they wish to protect.
Insurance should not be considered in isolation from asset management. Before discussing how much to protect, we need certainty about what exists, where it is, and what information supports that value.
Fernando Mello emphasizes that an outdated or imprecise valuation, especially in industrial plants that have undergone investments and expansions, can lead to significant under-protection.
Climate change, in this context, demands a reflection on corporate governance itself. Andrea Mello, executive director of Saraf, points out that inventory, often viewed merely as an accounting requirement, represents the capital invested by the company.
When this information does not reliably reach the board, the organization ends up making strategic decisions based on a foundation that may not fully represent reality.
For medium and large industrial companies, with complex structures and thousands of assets, integration among operations, accounting, asset management, risk, insurance, and technology departments becomes essential.
Technology as an Ally in Business Resilience
In a scenario of increasing exposure to climate risks, technology emerges as a fundamental ally in continuous asset management. The platform developed by Saraf Controle Patrimonial, for example, seeks to integrate people, processes, and technology for dynamic asset tracking.
The inventory shouldn’t end when the report is delivered. The next day, the company continues to move assets. If there’s no process to track these changes, the discrepancy begins again. Asset management needs to be continuous because operations are continuous.
Fernando Mello asserts that asset management needs to be continuous because operations are continuous.
The question managers and boards of directors should ask themselves is not just whether the company has insurance, but whether it has reliable asset information that allows it to precisely identify what needs to be protected. The cost of obtaining this clarity before a claim boils down to proactive and integrated management. Ignoring this necessity, however, can result in irreparable losses, especially in a world increasingly susceptible to the impacts of extreme climatic events. Investing in updated asset management and insurance is, therefore, a crucial step for business resilience and sustainability.
