Extreme Weather Patterns and Risk Assessment Strategies in the Banking Industry: A Survey

Purpose: The scope of the paper is to assess the current methodology regarding weather related risk management, as well as, changes in the risk management methodology considered by Bank Executives. Methodology: Over 150 Bank executives of banks in the Second Federal Reserve District were invited to response to a survey regarding extreme weather risk related adjustments in their organization at the operational level, the asset allocation level and the organizational with respect to risk identification and management, scenario analysis implementation and transparency. Findings: There is some movement by bank executives to assess, manage and report the risk exposure of large financial institutions to extreme weather events, but more in depth consideration should be undertaken in the following key areas identification, monitor, and management. Practical Implications: Climate change affects a large number of weather sensitive sectors including energy, transportation, agriculture, infrastructure, ecosystems and specific industries within these sectors especially financial services providers. Originality valua: The study recommends an in depth assessment of the impact of extreme weather related issues on the performance and the stability of financial intermediaries.