Addressing Physical Risk Impacts in Risk Management Practices
Addressing Physical Risk Impacts in Risk Management Practices
15 PagesThis case study examines how banks can address growing physical climate risks within risk management practices by using return‑period‑based stress testing. As climate events become more intense and frequent, banks face increased challenges in managing credit risk and maintaining capital adequacy. The study focuses on short‑term stress testing approaches that apply return periods, such as 1‑in‑100‑year events, to assess potential losses and vulnerabilities. By quantifying exposure to physical risks more systematically, banks can strengthen capital planning, enhance resilience, and improve decision‑making as climate impacts increasingly influence financial stability.
