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How Finalyse can help
PHYSICAL RISKS IMPACT MEASUREMENT
The Finalyse Climate Risk Centre of Excellence is developing a unique approach to integrate climate-related and environmental risks into financial institutions’ risk management frameworks, ensuring compliance with the recommendations set out in the ECB’s Guide on climate-related and environmental risks.
Our experts developed a prototype to demonstrate how banks should quantify their physical risks, using geospatial mapping, forward-looking hazard data and exposure characteristics.
Our Finalyse Flood Risk Prototype offers a practical implementation of a forward-looking flood risk assessment using the ISIMIP2b simulation round of flood discharge in combination with the CLIMADA engine. The tool is therefore capable of producing an expected annual impact (expressed in currency value) at a 150 arcsec (~5km) resolution for different climate scenarios at future dates.
How does Finalyse address your challenges?
Geolocalisation
The tool includes functionalities to geo-localise your exposures (based on full addresses or postcodes) and therefore simulate expected future damages caused by floods on your portfolios of collaterals.
Impact Function
The Prototype defines an impact function that translates the flood height (in number of meters) into an actual damage in percentage terms to the property.
Hazard Customisation
Within the protype it is possible to define the granularity level of hazard maps, climate Scenario, time horizon and intensity at a given resolution level.
Final Output
It consists of a dashboard at exposure level reporting information on country, commune, longitude/latitude, year, impact model, atmospheric input model and impact output.
Coverage
In a first step, the prototype focuses on River Flood risk. However, according to the results of AR6 - Impacts, Adaptation and Vulnerability published by the IPCC in 2022, other relevant risks for the European continent are: Coastal Flood, Heat, Agriculture, Drought – which can be added to the prototype.
Regulatory Compliant
When it comes to physical risks assessment, our prototype matches the ECB’s requirements in terms of assessment level of time horizon, documentation, and measurement of materiality.
How does it work in practice?
Finalyse Flood Risk prototype is a practical implementation of a forward-looking flood risk assessment using the ISIMIP2b simulation round of flood discharge in combination with the CLIMADA engine. The tool is therefore capable of producing an expected annual impact (expressed in currency value) at a 150 arcsec (~5km) resolution for different climate scenarios at future dates. The tool includes functionalities to geo-localise your exposures and therefore simulate expected future damages caused by floods. The tool design responds to the ECB requirements concerning physical risk assessments for flooding.
Roles & purposes of a Physical Risk Assessment:
Physical risk assessment - key elements
Key elements for performing a Physical Risk Assessment:
Key Features
- The Finalyse Climate Risk Centre of Excellence is developing a unique approach to integrate climate-related and environmental risks into financial institutions’ risk management frameworks, ensuring compliance with the recommendations set out in the ECB’s Guide on climate-related and environmental risks.
- The Finalyse Flood Risk prototype makes use of tools and methodologies that are not strictly limited to flooding:
- Developments can be undertaken to study other physical risks: wildfires, storms, crop production damage, landslides etc.
- The set-up is present to input custom data, based on own research.
- The existing tool structure allows for additional analyses and a high level of customisation.
Our subject matter experts
Alexandre Synadino is a consultant with expertise in risk data analytics, climate risk management and regulatory reporting. He is an active member of the Finalyse Climate Risk Centre. His main area of expertise lies in the research, design and development of physical risk assessments using different tools and methods. Alexandre is involved in the conceptualisation of measurement approaches to cover multiple hazard types, geographies and scenarios to respond to regulatory demands for granular and forward-looking analyses.
Laurens Vanweddingen is a Senior Consultant with more than 7 years of experience in credit risk management and risk analytics. He is a Certified Financial Risk Manager (FRM) and currently enrolled in the Sustainability and Climate Risk Program of GARP. Within the Finalyse Climate Risk Centre of Excellence he is mainly active in the research, design and development of physical risk assessments.