May 19, 2020

A $200bn hit to business? Hurricanes Irma and Harvey by the numbers

Hurricane Harvey
hurricane irma
Pouyan Broukhim
3 min
A $200bn hit to business? Hurricanes Irma and Harvey by the numbers

The Caribbean and south US has been left battered following the damage caused by Hurricanes Harvey and Irma over the past fortnight.

It is hard to know the exact combined impact of the storms, but industry analysts are predicting that the economic impact will cost hundreds of millions to the US economy.

Global financial insight specialist Moody’s Analytics has suggested that the combined costs of the storms are comparable to that of Hurricane Katrina back in 2005, predicting as much as $200bn has been wiped from the economy as a result of both hurricanes.

AccuWeather President Joel Myers have made similar predictions, stating that the economic costs incurred by disruptions to businesses, increased unemployment, damage to infrastructure and property, agriculture losses, and higher fuel prices incurred by the storm would amount to least $190mn.

With business bearing much of the brunt of these costs, these are some of the sectors that have been the worst affected.

Insurance

Naturally, with the level of destruction that two category four hurricanes bring, the insurance industry will be hit particularly hard in the wake of the destruction.

AIR Worldwide, a firm specialising in catastrophe analysis, has predicted that losses from Hurricane Irma could be as much as $40bn.

Meanwhile, an insurance analyst at Imperial Capital New York estimated that insurance firms may have to pay out as much as $100bn for the effects of Hurricane Harvey.

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Agriculture

Florida is one of the key agricultural regions in the US. The state accounts for 50% of the country’s grapefruit production, and is also a significant orange juice producer, ranking second only to Brazil.

However, Hurricane Irma has caused huge damage to Florida’s agricultural industry, with estimates suggesting that the storm caused up to 30% losses on major crop yields such as these.

Energy

Whilst Hurricane Irma caused much less disruption to the oil and gas industry, Hurricane Harvey hit the heartland of the sector located onthe Texas Gulf coast, bringing much of it to a standstill.

The US Bureau of Safety and Environmental Enforcement estimated that 22% of oil production and 23% of natural gas production in the Gulf had been shut down, leading to surging regional oil prices.

The petrochemicals industry saw similar effects, with the storm shutting down many key plants, resulting in 40% of the country’s petrochemical industry going offline.

Tourism

A significant proportion of South Florida’s tourism industry lies on the coast, an area that would have been subject to instant destruction from Hurricane Irma’s force.

With tourism accounting for as many as 1.4mn jobs, 112mn annual visits and $109bn of income to the US, a significant amount of this is expected to be lost following the effects of the Hurricane.

Furthermore, as many as 11,000 flights were cancelled as a result of Hurricane Harvey, with floods shutting down both main Houston airports for days, and 4,600 were cancelled in preparation for Irma over the weekend, a significant financial loss to US airlines.

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Tax
Compliance
financeleaders
Deloitte
Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

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