How to Measure Nature Risk?
In June 2024, Dawn Lalonde, a beekeeper in northern Ontario noticed a sudden die-off of about a million bees. The bee die-off affects much more than the amount of honey she can collect from her hives. Without bees, local crops and orchards do not get adequately pollinated, leading to lower yields. This is but one recent example of a type of risk coming into new prominence in business and economics: nature risk. Nature risk, the loss of things in the world not created or domesticated by humans, affects businesses and economies directly, by impacting operations such as lack of pollination, […]
The Cost of Sustainability
It seems not a newscast goes by without mention of carbon taxes, or emissions trading, or severe weather events. As wildfire season ramps up, the benefits to switching to renewable energy are apparent. Gradually—some might say too gradually—climate policy (both to mitigate and adapt to changing conditions) is being implemented. New measures chiefly target industry sectors that have the greatest carbon emissions, such as fossil fuels, agriculture, and fashion. But how does sustainability affect the cost of capital, in other words, the minimum rate of return a company must earn before generating value? “There’s plentiful research on the benefits,” said […]
The Role of Insurance in Recovery
Climate change is bringing on events, such as hurricanes and wildfires, of greater severity and frequency than ever before. How does insurance help communities rebuild? What economic barriers arise during recovery? Is insurance the best way to provide disaster relief? These are some of the questions tackled by Carolyn Kousky of the Environmental Defense Fund (EDF) in her recent book and research. She is a co-editor of A Blueprint for Coastal Adaptation and author of Understanding Disaster Insurance: New Tools for a More Resilient Future. On October 19, 2023, Carolyn Kousky, Associate VP, Economics and Policy Analysis at EDF, gave a presentation on […]
Heated Exchange
Climate-related natural disasters are increasing in frequency and severity and costs. Since climate change is not equal across countries, how does a country’s exchange rate respond to such shocks? Furthermore, is it possible to build an economic model to predict future changes? On April 6, 2023, Galina Hale, professor of economics at the University of California at Santa Cruz, delivered a webinar about the effect of climate change on exchange rates. This was part of the series of talks sponsored by the Federal Reserve Bank of San Francisco (FRBSF), titled the Virtual Seminar on Climate Economics. She reported results from […]
Who’s Minding the Bots?
Artificial intelligence (AI) is being implemented in nearly all sectors of the economy at an increasing rate. A 2019 survey by Gartner showed that 37 percent of organizations had already implemented AI in some form. When it comes to integrating AI into your company, what are the risks? What are the opportunities? On March 12, 2021, the Industry Relations and Corporate Governance Committee of the CFA Society Toronto convened a panel of experts to look at how effectively a company’s corporate governance can provide proper oversight and avoid mistakes. In other words, “who and how we will mind the bots.” […]
The Value of Data
What is the value of data? Who benefits from data? Can you construct a decent predictive model to manage risk if you have lousy data? Some enterprising souls have tried to sell their data back to the tech giants that collect and use big datasets. There are even some small companies such as CitizenMe and Datum that pay a user for taking a quiz or sending location data. “Data are far from becoming a standardized commodity whose value can readily be established through trades,” writes Diane Coyle, professor at University of Cambridge, in a report she tabled February 26, 2020, […]
Top 5 Trends in Risk Management
The champagne has been drunk, and the New Year has been rung in. What trends are predicted in risk management as we welcome the new decade? “In 2020, we’ll likely see significant changes in risk models, processes and functions,” predicts Brenda Boultwood, Risk Advisory Partner at Deloitte. As a senior expert in risk culture and corporate governance, she published an article online January 10, 2020, for the Global Association of Risk Professionals (GARP). We present the highlights and a link to the full article below. The three lines of defense business model, as we know it, will end This is actually […]
From brown energy to green
How will climate change affect the financial sector and the broader economy? What policy responses will mitigate climate change risks? Recently, the US Federal Reserve Bank (FRB) sponsored the first conference dedicated to exploring the economic and financial risks associated with climate change. “Climate change will have sweeping effects on our economy and financial system,” says the report summarizing the main themes of the conference. The report, released on December 16, 2019, was co-authored by Galina B. Hale, Òscar Jordà, and Glenn D. Rudebusch. Hale is a research advisor and Jordà and Rudebusch are both senior policy advisors at the Federal […]
Wanted: Business Expertise
Artificial intelligence can be expensive and tricky to implement. Is it worth the trouble? Two organizations recently decided to pose the question to those who were working in financial institutions. “Due to budget constraints, a company might not always be able to apply artificial intelligence. But, to those who can, the benefits have become clear,” said Mahdi Amri, Partner and National AI Services Leader, Canada at Omnia, which is the artificial intelligence practice at Deloitte. On January 24, 2019, Amri was the second of two panellists who discussed early results of a joint survey by SAS and the Global Association […]
Operationalizing A.I.
How pervasive is the use of artificial intelligence in the field of financial risk management? What are the key challenges in AI implementation over the next two to three years? These issues were examined in early 2019 via the webinar, Operationalizing AI and Risk in Banking, sponsored by the Global Association of Risk Professionals (GARP). “We found exceptionally high rates of AI usage among survey respondents,” said Katherine Taylor, Senior Data Scientist at the software company SAS. On January 24, 2019, Taylor was the first of two panellists who presented a “sneak peek” at a joint survey by SAS and […]