Toyota Announces They Will Shut Down North American Factories

Facing a parts shortage due to last month’s earthquake and tsunami in Japan, Toyota announced earlier today that they will likely shut North American factories.

The shutdown is said to be temporary, but also unknown is for how long the shutdown will last, and will affect about 25,000 workers here in the United States. All of which depends on how quickly the Japanese auto parts makers can get back to business.

Honda Motor Co. and Subaru of America also stated they would slow U.S. production to conserve parts as well.

Production of certain parts are not expected to resume for at least 30 days in a company memo to dealers and added, "Both the number of affected parts and length of production stoppage may increase."

The disaster in Japan, although exceptional in scope and size is an example how vulnerable our supply chains are. In our globalized world, everything is tied together and companies MUST do a better job at redistributing the risk of their supply chains, and it needs to happen quickly.

Large scale regional natural disasters are also tied to the globalized economy and this one will likely impact the overall recovery of the American economy which will further impacting the global economy yet again.  

Ironically, in the January copy of Reinsurance Magazine the article – World Cannot Take Another Crisis Global Leaders Warned and it points to the need to “solve future global risks before they become crises” and that “Twentieth century systems are failing to manage 21^st century risks.” More can and should be done to manage our risks.

SEC Makes Climate Change Risk Reporting Mandatory

How up to date is your business when it comes to assessing your risk exposures, contingency planning, and overall risk management?  Now, what would you say if I told you the SEC is requiring ALL publicly traded companies to have a written plan detailing the risks, and how they will respond to climate change?

Even though this occurred back in January of this year, I am finding very few people who have been aware of this new reporting and disclosure requirement.

The other day in my newsletter I mentioned that the SEC had issued interpretive guidance on disclosure related to business or legal developments regarding climate change.  The response has been interesting, from laughter, and dismissal, to shock. Some people wondering just how they are supposed to measure the risk and others to say they have zero risks and exposures to it altogether.  

Now, I am not currently buying into the man-made climate change side of the equation as I mentioned in the newsletter, and personally believe that these events are cyclical and natural. I also recognize that the issue is basically a political hot potato at the moment, and think most people here in the United States feel the same way I do. Though I admit I could be wrong.

The real story like I stated in my newsletter, is that history shows us that the climate will change, and the impacts of those changes can be dramatic, and have a negative impact on the business community. These impacts can occur whether the climate grows colder or hotter. So, even if it is not man-made, does it matter? The impacts will remain the same.

I am not going to add my assessments here as I did in the newsletter, but I did want to mention it here on Disaster Preparedness Blog for those that may not be aware of this, and provide you the links to the information from the SEC.

Here is a copy of the SEC Press Release on this ruling as well their Interpretive Guidance to the ruling at their respective links.

Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

• Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.

• Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.

• Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.

• Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

No matter how you look at this issue, here is one other angle to consider. When looking at future risks, be certain to look at how possible future political and regulatory decisions might impact your business.