Weathering storms and business

Background

The legend of Hurricane Gilbert forms a major part of growing up in Jamaica, along with harrowing tales of Hurricane Ivan in 2004 forcing businesses to close doors, some to never be opened again. In more recent history Hurricane Irma, the most powerful Atlantic storm ever recorded dealt colossal damage to a few islands, even wiping out Barbuda before dealing memorable blows to Southern and Western Florida. It’s established that the tropical region is home to high temperatures and violent storms but how does this impact business activity?

Threats

Hurricanes generally disrupt business activity, due to the uncertainty surrounding the impact of the storm. Uncertainty in general urges investors to adopt a “wait and see” approach, causing the flow of funds to productive projects to be halted or reduced. When capital flow is low, so is output. Further, postponements harm productivity because for instance, Tuesday’s work will have to be done on Friday. Additionally, extended periods of a lack of water, electricity and internet access also cripples productivity which can threaten in a competitive global environment. Separately, the storm itself creates notable environmental damage that creates new expenses cut which into profits, the precious elixir of life for all businesses regardless of their industry. Repairs to infrastructure, loss of stock, unavailable staff members combined with economic uncertainty lowering business confidence together create problems for Caribbean states. This is illustrated by a bout of heavy rain in May 2017 reducing agricultural output and hurting Jamaica’s economic growth for the second quarter.

Opportunities

Storms create a spike in commercial activity for traders of hardware products, fast trading consumer goods such as supermarkets and the producers of essentials like drinking water. On a separate note, in light of heightening climate change risks and awareness there lies vast opportunities for projects which rebuild the communities and business landscape Caribbean and tropical regions globally with new materials that are more environmentally appropriate. Infrastructure that can absorb high radiation, withstand super storms and use solar power primarily needs fresh capital. In addition to these concerns, increased water stress, increased need for recycling and the reduction of carbon emissions create demand for new business models that would not have been viable in previous decades.

Finally

The tides of change will gradually urge prudent financiers to become more risk agile and less risk averse. Only the most skilled, risk agile, adaptable entrepreneurs will survive a more volatile and dynamic business landscape. A future underscored by an enormous digital boom and seismic shifts in climate dynamics, all of which ruthlessly change business models that were once viable into a “waste of time” and vice versa.

By Julian Morrison

Julian is an Investment Advisor at the JMMB Group with experience in Insurance, Banking and Economics. He holds a Wealth Management and Financial planning certificate and another in Mergers and Acquisitions from the Jamaica Stock Exchange. Julian is also a member of the Jamaica Chamber of Commerce and takes a special interest in the development of Micro, Small and Medium Sized Enterprises (MSMEs) in the Caribbean.