Top risks for contractors in H1 2025: Bidding and contracting, climate and sustainability, and cyber challenges

Enhancing resilience amid more frequent and severe weather-related events

The frequency of severe weather-related events - including tornadoes, wildfires, and severe storms and flooding - is on the rise. According to the National Oceanic and Atmospheric Administration (NOAA), in 2024, the US experienced 27 disasters that exceeded one billion dollars in damages, totaling $182.7 billion. This surpasses both the average annual costs and the number of such events over the past five years, highlighting a concerning trend of increasing climate-related risks.

At the same time, extreme heat is a major concern that can bring financial challenges. In the US alone, the annual economic losses from extreme heat are estimated to be around US$100 billion and could double by 2030 and quintuple by 2050 unless climate change is addressed.

For project owners, developers, and contractors, severe weather events can lead to worker shortages, supply chain disruptions, and extensive property damage. And while less than 4% of US-based respondents to our survey selected environmental and climate risks as their top business challenge, our data shows that there is recognition of the potential challenges related to climate and sustainability risks. In fact, 93% of US-based respondents noted that climate and sustainability risks could impact costs, just under 90% said these risks could lead to regulatory burdens, and 65% said they would lead to physical damage (see Figure 1).

Figure 1: Climate and sustainability risks could lead to rising costs, regulatory concerns, and property damage

Sophisticated project owners are keenly aware of the potential impacts of severe weather events and are reviewing and assessing design standards to develop more resilient structures. There is also recognition of the increased frequency of catastrophic events, which is then reflected in design plans. Measures to address climate-related risks include raising site levels and ensuring that critical equipment is elevated.

Despite the potentially devastating impact of severe weather, data from our global survey shows a relatively low adoption of climate risk management strategies (see Figure 2 ). Less than a third of respondents carry out assessments of physical climate risks, including on their supply chains. Considering the complexity of supply chains, lack of visibility beyond tier 1 suppliers could lead to unforeseen challenges, underscoring the importance of using tools, such as Marsh McLennan's Sentrisk, to help identify unknown vulnerabilities, potentially improving your ability to continue operating even when one supplier is affected by severe weather.

Figure 2: Low adoption of climate risk management strategies