SCR

SCR practice questions, page 4 of 6, with answer review and explanations.

Question 16

A major hurricane extensively damages the electrical infrastructure of a utility company. To improve the utility’s risk management, the risk director prepares a strategy plan and incorporates climate risk considerations within the existing risk management framework. Which recommendation should the director make to incorporate climate risk into the framework’s risk identification component?

  1. Evaluate the vulnerability and adaptive capacity of facilities using data gathered on the scope of climate risks.
  2. Flag any substantial changes in the utility’s external environment to trigger a modification of the risk management process.
  3. Examine the transmission channels of climate risk drivers into financial risk to determine which risks are likely to materialize for the utility.
  4. Rate risks on impact and level of control to focus on risks with the most severe impact but over which the utility has the most control to improve outcomes.

Question 17

The national meteorological agency of a small African nation forms a team to identify and assess extreme climate events in the region. The team leader introduces extreme attribution science along with data and techniques used to connect climate change to extreme events. To attribute extreme events to climate change, what information will be most useful for the team to collect?

  1. Statistical analysis of historic drought occurrences
  2. Future projections of global emissions
  3. Cross-hatching that indicates climate model agreement
  4. Community exposure to increased flooding events

Question 18

A large family-owned agrichemicals company in South America will produce its first sustainability report. The company hires a consultant to manage this process and familiarize all owners with current practices and historical precedents of social responsibility. How should the consultant describe the evolution of the social responsibility of business over the past 50 years?

  1. Emphasizing good governance toward resource and energy efficiency to improve operations
  2. Investor-led focus on environmental metrics toward a broader focus on reducing poverty and societal disparities globally
  3. Corporate prioritization of economic growth toward recognizing obligations to improve nonfinancial outcomes for society
  4. Corporate self-regulation toward increasing government responsibility for social issues

Question 19

A mid-size bank in Australia will implement scenario analysis as part of a risk assessment to measure climate risk. A risk manager in charge of this project reviews current practices among peers worldwide. To align with common and well-established practices of financial firms, how will the risk manager implement scenario analysis to assess climate risk?

  1. Create inclusionary criteria for investments based on climate risk
  2. Provide ex-ante climate risk analysis to national regulators
  3. Compare the likelihood of physical and transition risks
  4. Examine portfolio-level exposures in various climate outcomes

Question 20

As climate change poses new financial risks to a central bank’s monetary policy operations, the bank decides to adapt operations with NGFS guidelines. Because the central bank does not include climate change in supervision practices, the bank consults subject matter experts (SMEs) to develop a proposal for central bank action on climate change. After completing the risk assessment, SMEs recommend the bank incorporate microprudential and macroprudential measures to embed climate change into supervision practices. Which action are SMEs likely to recommend?

  1. Conduct climate stress tests with standardized policy scenarios and feedback loops as a microproduential measure.
  2. Increase internal resources and establish an external review process for climate risk integration as a macroprudential measure.
  3. Adhere to disclosure best practice when integrating climate risk by following TCFD disclosure recommendations as a microprudential measure.
  4. Implement the widely adopted macroprudential measure of a procyclical capital buffer to increase equity capital during periods of carbon-intensive credit.