Climate change risks and the Federal Reserve Bank

Climate change risks and the Federal Reserve Bank

Aug 21st, 2019

Consider Climate change risks and the Federal Reserve Bank a follow up to our blogpost entitled (Reporting climate risks).

We read that the Federal Reserve Bank of San Francisco will reportedly host the first research conference focusing on climate change.

Climate change risks and the Federal Reserve Bank

We consider the UK actions in this field, the coalition of 30 central banks and this latest news as a tipping point in the climate change awareness. One that focuses on present, emerging, residual and latent risks. One that may lead to a consensus over an applied strategy definition.  

Climate change risks and the Federal Reserve Bank systemic risks

Climate change is already impacting industries bottom line. It will impact logistic networks and may pose threats to global economy, hence to the banking system.

Reportedly the Federal Reserve Bank of San Francisco seeks information on  “implications for monetary and prudential policy of climate change and its consequences”.

Climate change risks and the Federal Reserve Bank

Interestingly, however, the Bank has not joined the global bank initiative.

Silicon Valley and climate change risks

California name resonates with highly lucrative industries, technology and IT. However climate changes and natural hazards are very present and very significant, from seismic, to fires, flooding and many man-made contaminations.

Media are full of mesmerizing lucrative futures as AI, robots, the internet of things, 5G and driverless cars. No one seems to pay attention to a new “industry” that results from the need to mitigate climate changes effects and other “old style” hazards. Indeed, those “old style” hazards are going to impact the new “IT based” world in ways that may seem difficult to grasp.

The ubiquitous character of the “new and old” hazards and the interconnected quality of the IT-based world require specific characteristics. Indeed, it becomes paramount to enable the capacity to mitigate and act in rational prioritized ways. That is even over very large portfolio of potential targets.

In addition, as we pointed out recently, AI is not good to predict what it cannot learn from the past. Simply because it lacks imagination and builds relationships based on “the past” to project toward the future.

Present, emerging, residual and latent climate change risks leading to an applied strategy definition.  

Looking at climate change risks “in a silo” will not work. Interconnected systems have to be looked though convergent approaches. That is look simultaneously at all hazards. Furthermore, a rational risk assessment deployment should be (reference global hot spots) capable of:

  • adapting to new situation within and outside the system.
  • updating the values of probabilities and consequences as well as their respective uncertainties.
  • retrieving data using various queries.

The requirement to allow an applied strategy definition for present, emerging, residual and latent climate change risks is simole.  The risk register of a rational risk assessment should allow bottom-up aggregation of risks. As a result it would deliver the risk information required for decision-making support and other tactical and strategic planning purposes.

ORE is the perfect tool to attain these goals.

At Riskope we have included climate change risks in our convergent, scalable, updatable and drillable well before the term became a “buzz-word”.

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Category: Consequences, Probabilities, Risk analysis

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