Page 23 - Risk Management Bulletin January-June 2023

RMAI BULLETIN JANUARY - JUNE 2023

(e.g., whether impact materializes within tenor B.14 REs may also consider taking adequate measures
of financing). The assessment may be made on to safeguard business continuity in case of extreme
a periodic basis and its outcomes may be used climate change causing disruptions to their own
to update policies and procedures of the facilities, operations and major outsourced
entity. arrangements.

B.12 In case the necessary information to assess the Good Practices
impact of climate-related and environment risk is not RE may geographically scatter / locate their critical
available, REs may engage with their customers to functions (e.g., centralised processing centres, data
form an understanding of the extent to which the centres, servers, etc.) across various regions
impact may be material. REs may encourage their keeping in view flood, earthquake and other
customers to provide relevant climate-related climaterelated and environmental dangers
disclosures to foster greater awareness of climate risk identified with its own operations. This may be a
and engender responsible behaviour. They may further part of the REs’ Business Continuity Plan.
monitor the impact that climate risks may have on
outsourced arrangements, supply chains and business Risk Reporting
continuity planning.
B.15 Timely and regular reports on climate-related risk
exposures including adherence to risk appetite,
Risk Management and Mitigation progress of strategic and business plans, information
B.13 Once the potential impact of the financial risks on implementation of control and mitigation should be
arising from climate change are assessed to be material, provided to the Board of Directors. The frequency of
REs may establish and implement plans to manage its reporting may be tailored to the nature and magnitude
exposures and mitigate these risks, as well as regularly of the risks to which the RE is exposed to.
review and assess the effectiveness of those plans.
B.16 Where reliable or comparable climate-related
Good Practices data is not available, REs may consider using

REs may carry out substantial measures to mitigate reasonable proxies and assumptions as alternatives in
or refrain from climate-related risks that are not their internal reporting as an intermediate step.
in accordance with their risk appetite. These Limitations that prevent full climate risk data
measures can be developed in response to the RE’s assessment may be made explicit to stakeholders
own assessment of the climate-related risk where relevant.
concentrations. These mitigation measures may
include: Discussion Question 3: What are the main
• Customers in sectors which are highly challenges in integrating the climate risk
vulnerable to emerging climate risk may be framework in Governance, Strategy and Risk
subject to tenor limitations. Management? What is needed to overcome these?
Are there plans in place / being contemplated
• Customers with real estate collateral that do regarding the same by the REs?
not meet minimum sustainability criteria may
be subject to a lower loan-to-value limit.
C. Exploring how forward-looking tools like
• Customers for which production is directly
stress testing and climate scenario analysis
dependent on weather conditions may require
taking out insurance against extreme weather can be used to identify and assess
events (e.g., seasonal droughts, floods). vulnerabilities in REs
• Customers in CO2 / GHG intensive industries C.1 REs may need to incorporate an assessment of
may require having a sustainable energy both physical and transition risks across a range of
transition strategy climate-related scenarios. They may identify and

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