![]() ![]() Including the readaptation of traditional stress testing frameworks to capture the unique features of these new risks. Within the boundaries of their mandates, central banks and supervisors have been focusing on the development of appropriate tools to address climate related risks. Adaptation of the stress testing frameworks These climate related risks are, for example, extreme weather events, failure of climate change mitigation and adaptation and natural disasters. ![]() ![]() In fact, the World Economic Forum 2020 Global Risk report identified a list of climate related risks that are more likely to happen than the risk of a cyber-attack. Today, stress testing frameworks are becoming instrumental for institutions worldwide to assess the risks stemming from climate change. Over the past decades, stress tests have become an inseparable instrument of risk management: supervisory authorities use them to measure a bank’s exposure to various types of risks, ranging from “fat-finger” errors, to rogue traders to cybercrimes. The first application of stress tests can be traced back to the early 1990s, where individual banks were using them for their internal risk management processes. ![]()
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