What is Climate Risk Assessment?
A climate risk assessment is a process through which we can evaluate how climate change and extreme weather events might impact a specific area or entity. It helps us identify and understand the potential risks businesses face, what is the exposure to climate risks and what are the organisation-specific vulnerabilities. It also helps address transitional risks such as policy shifts, market changes, technological advancements and climate-related opportunities.
As the world increasingly faces rapid climate change, businesses across industries are increasingly vulnerable to both sudden and long-term threats. High-intensity natural disasters like cyclones and floods to heatwaves, rising sea levels and shifting rainfall patterns, have resulted in widespread economic, social and operational disruptions. As the world witnesses extreme climatic events, a climate risk assessment is a must.
What are Climate Risks?
Climate-related risks are diverse and increasing in both frequency and intensity.
Physical Climate Risks: These risks have the potential to cause physical damage and financial losses because of increasing exposure to climate hazards. Physical climate risks such as:
- Excessive heat impacting power systems and data centres
- Landslides and heavy rain affecting road and rail logistics
- Fires, tornadoes, and other natural disasters damage critical infrastructure
- Droughts threatening water-intensive manufacturing operations
- Coastal businesses facing flood and tsunami threats
Transition Climate Risks: Transition climate risks are associated with transitioning away from fossil fuels and reducing GHG emissions. Financial and operational risks associated with decarbonising business assets and operations are known as transitional climate risks.
Each risk carries the potential for financial losses, legal liabilities, operational disruptions, and reputational damage. Understanding these threats is the first step toward managing them.
Why Climate Risk Assessment Matters?
A robust climate risk assessment is not limited to just the prediction of climate risks but it is a comprehensive process that enables organisations to understand how climate variables interact with their operations, functions and processes. It helps in understanding how it affects the physical assets, supply chains, infrastructure, and financial performance.
As global regulations continue to emerge, governments, investors, clients and various other stakeholders are likely to demand climate-related disclosures. These disclosures help the government, and investors to understand what the organisation’s policy towards climate change is.
As countries start to navigate and transition to a low-carbon economy through carbon pricing, capping carbon emissions, and regulatory changes, companies need to understand and prepare for climate-resilient and climate-sensitive operations.
Key Aspects in Climate Risk Assessments:
At its core, climate risk assessment blends data, science and strategic planning. It involves
- Hazard Identification:
Identifying and mapping region-specific climate threats such as droughts, heavy rainfall, high temperatures, and floods.
- Vulnerability Assessment:
Evaluating the exposure of assets, infrastructure or people are affected by natural hazards.
- Impact and Risk Analysis:
Estimating the scale and likelihood of operational disruption or loss due to climate impacts.
- Scenario Planning:
Conducting simulations to understand organisational risks and opportunities under different possible futures and time horizons.
- Mitigation Planning:
Developing and implementing measures to reduce the potential impact of climate change and improve resilience.
Through systematic assessment of risks and gauging the likelihood and its impact, organisations can make informed decisions. Climate risk assessments also help in compliance with emerging regulations and strengthening their environmental, social and governance.
Partner with MitKat
MitKat Advisory provides expert climate risk assessment services to help organisations identify vulnerabilities, evaluate risks, and develop mitigation strategies that ensure continuity and resilience
Sectors We Serve
At MitKat, our climate risk assessment solutions are tailored to the specific needs of:
- Power generation and energy distribution companies
- Data centres and IT infrastructure providers
- Healthcare facilities and hospitals
- Manufacturing plants and supply chain networks
- Commercial complexes and institutional buildings
Why Choose MitKat Advisory?
MitKat’s strength lies in its multidisciplinary team of engineers, environmental planners, and risk analysts, backed by years of operational experience across high-risk geographies. Our commitment is not just to identify risk, but to enable clients to act on it with clarity.
To know more, please get in touch with us today!