Financial Crime World

Financial Institution Risk Management in Guadeloupe Takes Center Stage Amidst Climate Change Concerns

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In recent times, financial institutions (FIs) in Guadeloupe have been taking proactive measures to quantify the potential financial consequences of climate change. As governments and regulators worldwide propose new measures to grasp the effects of climate change on economies and regulated entities, leading FIs are already adapting stress testing and capital planning exercises to perform climate scenario analyses.

Adapting to Climate Change Risks

KPMG is playing a crucial role in helping organizations in Guadeloupe improve their understanding of the financial risks associated with climate change. This includes adjusting and responding to various climate scenarios, as well as enhancing financial and non-financial climate risk management practices.

Eight Key Steps for Financial Institutions

For those looking to get a head start on performing climate scenario analyses, a recent paper outlines eight key steps that FIs can take note of:

  • Step 1: Identify climate-related risks: Recognize the potential financial impacts of climate change on your organization.
  • Step 2: Assess current risk management practices: Evaluate the effectiveness of existing risk management frameworks in addressing climate-related risks.
  • Step 3: Develop a comprehensive climate risk strategy: Establish a strategy that integrates climate risk into overall risk management practices.
  • Step 4: Enhance data collection and analysis: Gather and analyze relevant data to better understand the potential financial consequences of climate change.
  • Step 5: Conduct stress testing and scenario analyses: Use stress testing and scenario analyses to simulate the impacts of various climate-related scenarios on your organization.
  • Step 6: Develop a capital planning framework: Establish a framework for allocating sufficient capital to address climate-related risks.
  • Step 7: Engage stakeholders and communicate effectively: Keep stakeholders informed about your organization’s approach to managing climate-related risks.
  • Step 8: Monitor and review risk management practices: Continuously monitor and review risk management practices to ensure they remain effective in addressing climate-related risks.

By adopting these measures, Guadeloupe’s financial sector can better prepare itself to withstand the emerging financial risks linked to climate change, ensuring business continuity and protecting the interests of stakeholders.