Climate-related disasters are becoming more frequent and more severe – and small businesses are feeling the heat.
The Auckland Anniversary floods and Cyclone Gabrielle caused up to $3 billion in business damage. While the physical damage was widespread, the ability to recover wasn’t. Big businesses with cash reserves, broad networks and contingency plans bounced back faster. But for many small and medium-sized enterprises (SMEs), recovery has been slow and painful.
If you’re running a small business, it’s time to take climate risk seriously.
Big storm, bigger consequences
Think of a natural disaster hitting your business like a stone being dropped into a pond. The first ripple strikes your premises, then they start to spread – through your operations, supply chain, customers and community. At each stage, the disruption deepens, the stress builds, and the costs climb. That’s how disasters play out for SMEs.
SMEs aren’t built like big corporates, and they don’t have the same buffers. Many lack business continuity plans, sufficient insurance or cash reserves. So, when disaster strikes, small businesses are often first to feel it and can be the last to recover.
Layered impact, with lasting loss
When a storm hits, the damage can be immediate and visible. Roofs are torn off workshops, stockrooms are flooded, vehicles are destroyed, and trees crash through shopfronts. Clean-up takes time, money and energy.
But the invisible losses can be just as damaging. Power cuts, internet outages and unsafe conditions can force many SMEs to close – sometimes for weeks or more. That downtime affects revenue, staff, and customers. For a small business, even a few days offline can be the tipping point.
Then come the flow-on effects. Roads close. Supply chains stall. Infrastructure fails. You can’t get goods in or send services out. Behind it all is the human cost. Many SME owners are cleaning up their business while also dealing with damage at home. It’s exhausting to manage all at once – financially, emotionally and physically. At Vero, we see this picture clearly in the claims that come through. After one major flood in April, we received more than 1,000 claims – each telling a story of compounding, multi-layered loss.
When small businesses are unable to recover, the consequences often extend far beyond the business itself. Employees are laid off, households face a drop in income, and communities lose essential services. SMEs employ more than 679,000 New Zealanders, so when they falter, the impact is felt across the entire economy.
Getting ahead of the incoming changes
Right now, the Government is developing a National Climate Adaptation Framework – a long-term plan to help the country manage the physical impacts of climate change. The Ministry for the Environment’s Independent Reference Group delivered its recommendations in July, outlining significant shifts in how we fund and manage climate risks.
When the framework takes shape, you can expect businesses to face stronger pressure to be self-sufficient in the face of natural disasters, with the government stepping back from previously assumed support.
For SMEs, this creates both a challenge and an opportunity. Businesses that act early will improve their ability to withstand disruption, as well as potentially avoiding ballooning costs.
Our 2025 Vero SME Insurance Index found that 59% of SMEs have no formal risk management process, and 52% rarely or never assess their risks. That’s a gap many SMEs can’t afford.
Once you know your risks, the solutions don’t have to be complex. It could be as simple as raising stock off the floor, identifying alternative suppliers, or planning what to do in a power cut.
Small steps now, or fewer choices later
If you act early, you can adapt on your terms. Wait too long, and choices start to vanish. That might mean being the last business left in a high-risk zone with no customers, or facing steep relocation costs when everyone else has already moved on.
Be honest about the risks your business faces and talk to people who can help. Your insurance broker can give you a clearer picture and make sure nothing critical is missed.
It’s also worth reviewing your insurance cover. Two in five SMEs told us they’d had a claim that didn’t cover the full loss. You don’t want to be caught out. Adapting now will position your business to weather the storm and keep trading through increasingly frequent disruptions.
Resilience is good business
Resilience isn’t a luxury. It’s a necessity. And the cost of ignoring it keeps rising. Prepare wisely. And make sure your business can keep trading – no matter what the weather brings.
Ideas and insights from Sacha Cowlrick, Suncorp NZ
