Question #48Topic 1

A major hurricane extensively damages the electrical infrastructure of a utility

company. To improve the utility’s risk management, the risk director prepares a
strategy plan and incorporates climate risk considerations within the existing risk
management framework.
Which recommendation should the director make to incorporate climate risk into the
framework’s risk identification component?

 A. Evaluate the vulnerability and adaptive capacity of facilities using data gathered on
the scope of climate risks.
 B. Flag any substantial changes in the utility’s external environment to trigger a
modification of the risk management process.
 C. Examine the transmission channels of climate risk drivers into financial risk to
determine which risks are likely to materialize for the utility. Most Voted
 D. Rate risks on impact and level of control to focus on risks with the most severe
impact but over which the utility has the most control to improve outcomes.

Hide Solution Discussion 7

Correct Answer: A

Question #49Topic 1
As climate change poses new financial risks to a central bank’s monetary policy
operations, the bank decides to adapt operations with NGFS guidelines. Because the
central bank does not include climate change in supervision practices, the bank
consults subject matter experts (SMEs) to develop a proposal for central bank action
on climate change. After completing the risk assessment, SMEs recommend the
bank incorporate microprudential and macroprudential measures to embed climate
change into supervision practices.
Which action are SMEs likely to recommend?

 A. Conduct climate stress tests with standardized policy scenarios and feedback loops
as a microproduential measure.
 B. Increase internal resources and establish an external review process for climate risk
integration as a macroprudential measure.
 C. Adhere to disclosure best practice when integrating climate risk by following TCFD
disclosure recommendations as a microprudential measure. Most Voted
 D. Implement the widely adopted macroprudential measure of a procyclical capital
buffer to increase equity capital during periods of carbon-intensive credit.

Hide Solution Discussion 8

Correct Answer: B