Flood Risk= f (hazard, vulnerability, exposure)
Climate Risk = f (hazard, vulnerability, exposure) ???
Typically, risk is a function of hazard, vulnerability and exposure. Change of vulnerability and/or exposure can modify the level of risk in a state where level of hazard is constant.
In general, the term climate risk mostly emphasizes climate change. To assess climate rick from climate change, we must consider vulnerability and exposure as constant. However, in the typical formula, we can have higher climate risk without any change in climate.
Looking for your kind participation 😊
I am totally agree with you ( Richard Fielding ).
I am just curious to know, how others are thinking about Climate Risk. As a practitioner and researcher, when I do typical risk assessment, I never give extra attention to Hazard. Rather, i treat all parameters (hazard, vulnerability and exposure) equally.
However, when we talk Climate Risk, it seems that we are giving extraordinary focus on climate change. And sometimes intentionally or unintentionally we are blaming climate change for the ultimate risk.
As you mentioned "It depends what we mean by "Risk", we also need to make it clear what we a meaning by "Climate Risk".
It depends what you mean by "risk". If you are talking about some objective index of the probability that a negative or undesirable event (hazard) will occur, then the probability function is what you need. If you are trying to determine how much damage will occur if a hazard occurs, then you need an actuary or loss adjustment approach of the kind used by the insurance industry. If you are trying to determine the (probability x impact) function, which may equate to (hazard x vulnerability x probability of exposure), then it becomes a lot more complex as the latter two variables are "fuzzy". It is important to understand that risk and the perception of risk are not very different. Determining the probability and consequences of a hazard impact is not the same as "risk" (in my humble opinion) :-) .
I am totally agree with you ( Richard Fielding ).
I am just curious to know, how others are thinking about Climate Risk. As a practitioner and researcher, when I do typical risk assessment, I never give extra attention to Hazard. Rather, i treat all parameters (hazard, vulnerability and exposure) equally.
However, when we talk Climate Risk, it seems that we are giving extraordinary focus on climate change. And sometimes intentionally or unintentionally we are blaming climate change for the ultimate risk.
As you mentioned "It depends what we mean by "Risk", we also need to make it clear what we a meaning by "Climate Risk".
Climate change is one of the causes of successive risks to physical systems, ecosystems, economics and society, and they are interlinked in determining the starting line or threshold limits to undesirable levels. Therefore, the assessment of climate risks across different fields, and in a meaningful way for decision makers, poses a major scientific challenge.
1) Climate and Climate Change are different.
Some industries, like the insurance one, have a long experience in evaluate (or even measure) frequency and severity of events deriving from climate (es. floods). These approaches are mainly based on historical data. Nowadays the challenge is that climate has changed (climate change) and will change further in the future. Therefore, we have a structural break in time series that affects both frequency and severity. In addition, certain events did never happen before in certain areas and we have to tackle also this issue. In my opinion there must be a shift from actuarial approaches to scenario one or stress test one but at the same time we must to continue to collect historical data in order to rebuild sound time series.
2) Climate Change risk is different from Climate Change related Financial risk.
Having say that, for the financial industry there is an additional piece of work to do: it is related to climate change related financial risk. In fact, ones we have frequency and severity of climate events (floods, hail, heat bubbles, etc.) we still do not know if and how these will translate in financial problems for enterprises because there will be different degree of adaptation to physical or transition risk. Adaptation to physical risk can be exemplified by cultivation with protection networks against increasingly violent hail, while for adaptation to transition risk we could mention a tourist area where the average temperature will decrease with public and private policies in order to maintain the tourist flow stable in a scenario of higher temperature in the surrounding area. Another transition risk is related to new regulation, like carbon emission pricing: the financial risk related to a lack of adaptation could be very high (no energy efficiency, no renewable energy sources and therefore high emission costs) but it could also define a competitive advantage for some players that have invested in new technologies.
Open to share experiences on both topics.
Thanks
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