The Potential Impacts of Climate Change on Operational Risk
Thought Leadership Webinar: There has been "very limited focus" to date on the potential impacts of Climate Change on Operational and Reputational Risks. This session will fill this gap by explaining the potential behavioral and economic consequences of Climate Change; their transmission into Operational and Reputational Risk losses; and the tailoring of quantification techniques for: expected losses, scenario analysis, capital modelling, and reputational damage for different Climate Change scenarios.
Date:
September 14, 2022
Time:
10:00 - 11:00 a.m. EDT
3:00 - 4:00 p.m. BST
Presented By:
Michael Grimwade
Managing Director, Operational Risk at ICBC Standard Bank
Session Length:
60 minutes
This session will address the current “very limited focus” (Basel Committee, 2021) on the potential impacts of Climate Change on Operational and Reputational Risks. It begins by explaining the potential behavioral and economic consequences of Climate Change. Due to the scarcity of data, parallels are drawn with past crises and events e.g. the Global Financial Crisis, the COVID-19 pandemic, and El Niño. The Ten Laws of Operational Risk are used to explain the transmission of these behavioral and economic consequences to Operational and Reputational Risks. The session concludes by considering how existing risk management quantification techniques should be tailored for Climate Change.
The key takeaways from this session are that both Transition and Physical Risks may have economic consequences, respectively through primarily the disruption of demand and supply. These economic shocks can exacerbate existing Operational Risk losses; uncover past failures; and lead to inappropriate responses. The significance and rapidity of these economic shocks is key to increases in Operational Risk losses. The most rapid economic impacts may arise from Transition Risks in the “Late Action” scenario and Physical Risks in the “No Additional Action” scenario. The largest financial impacts from Climate Change will likely relate to CPBP rather than business disruption. The quantification of these Climate Change related risks is not an academic exercise, but instead supports the making of better decisions now, in order to better manage Operational and Reputational Risks in the future. Climate Change may impact a range of components of Operational Risk capital models, influencing different pillars over different time horizons, depending on the specific Climate Change scenario. The financial consequences of reputational damage may also prove to be very significant.
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Michael is Head of Operational Risk for ICBC Standard Bank and has previously held senior Op Risk management roles at MUFG Securities, RBS and Lloyds TSB. Prior to this Michael was a management consultant with PwC and Deloitte Consulting. He has been a Director of the Institute of Operational Risk, and is currently the Chair of the AFB’s Operational Risk Expert Panel.
Michael is the author of a number of articles on setting appetite for Op Risk, scenario analysis techniques, Climate Change, quantifying emerging risks and modelling Op Risk capital. He received an award in 2014 from the Institute of Operational Risk for his contribution to the profession. His second book, “Ten Laws of Operational Risk: Understanding its Behaviours to Improve its Management,” was published in December 2021. In his book, he delivers an insightful discussion of the nature of operational risk and a redesign of the profession's existing tools.
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| Continued Risk Learning Credits: 1 |
PRMIA Continued Risk Learning (CRL) programs provide you with the opportunity to formally recognize your professional development, documenting your evolution as a risk professional. Employers can see that you are not static, making you a highly valued, dynamic, and desirable employee. The CRL program is open to all Contributing, Sustaining, and Risk Leader members, providing a convenient and easily accessible way to submit, manage, track and document your activities online through the PRMIA CRL Center. To request CRL credits, please email [email protected].
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Price |
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Members (Sustaining, Corporate, RIM & Contributing)
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COMPLIMENTARY |
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Non Member |
$30 USD
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