A generalization of physical and climatic risks which requires financial players to change their risk management system
While climatic events represent an increasingly significant cost for companies, physical risks are still the poor relation of financial players' reporting, as explained by a UNEPFI study which showed that more than half of actors have not taken their exposure to physical risks into account in their climate reports.
The generalization of risks, whether climatic, physical, and even pandemic, has highlighted the limit of the risk pooling effect on which insurers have often relied.
Faced with these new challenges, financial institutions find themselves increasingly at a loss.
Adequation Advisory is part of this need for banks and insurers to develop their risk management model by integrating sustainability risks, often linked to an awareness of the climate emergency.
According to the consulting firm, this requires the integration of three main axes into the system:
physical risks, consequences of damage caused by climate change;
climate risks, which may, for companies, translate into obligations to transition to a low-carbon economy and liability risks related to global warming;
finally, in a more general way, the notion of extra-financial performance.
The consulting firm that supports financial players in their risk management system
Adequation Advisory
Regulatory compliance and innovation in risk management: an approach to making the economic model of financial institutions viable
Due to all these new imperatives, Adequation Advisory has chosen to invest both in the review, analysis and interpretation of regulatory texts, as well as in the observation and analysis of market trends. , in order to support its customers in their quest for sustainable performance.
By delivering tailor-made services thanks to its cutting-edge know-how and expertise, the consulting firm offers its clients an operational and pragmatic translation of regulatory changes and their impacts.
Regulatory compliance is indeed the first major emergency for financial players.
Whether we are talking about ESG investments, in particular with the Taxonomy and SFDR regulations, reporting constraints at entity and product level, or regulatory requirements that must take into account customer preferences as part of the process distribution, banks and insurance companies come up against a veritable regulatory patchwork!
Beyond the regulatory aspect, Adequation Advisory, through its expertise in financial sector trends in terms of risk management, also supports its clients in the search for new means and new innovative processes to deal with these new risks.
By making his decryptions and analyzes available to his clients, he advises financial institutions throughout their value chain, from assets to liabilities, including their chain of management and distribution of financial products or insurance.
Parametric risks, the launch of a cyber disaster bond that can be used for hedging purposes in the event of risks related to natural disasters, or even an ecological dividend are all innovations that the consulting firm scrutinizes and analyzes every day for its clients.
Promote quality extra-financial data: make the process of adapting to new environmental and social challenges sustainable
These systems, both related to regulations and innovation, can be obsolete without the contribution of high-quality and transparent extra-financial data.
As greenwashing often harms banks and insurance companies, it is a question, in addition to reporting spreading out numerous extra-financial data and indicators, of making the data verifiable, comparable and analyzable.
This is based on two main points: on the one hand, the implementation of quality data governance;
and, on the other hand, compliance with regulatory requirements in terms of reporting and communication, in order to ultimately: give credibility to extra-financial data and avoid any risk of greenwashing.
This is also in line with the regulations, in particular the Climate and Resilience law, which prohibits boasting of the carbon neutrality of products, unless this is proven by the production of an annual report.
Or, the European CSRD directive which will require the consistency of sustainability reporting with financial reporting, which can no longer be treated separately, thus promoting greater connectivity between extra-financial data and financial data.
This will involve more complexity and cumbersome reporting associated with the CSRD in terms of the accuracy of the data to be communicated and internal control, but also formalization and documentation of the company's transformation process….
Through these means, financial institutions will achieve an environmental performance objective, which will go hand in hand with financial performance.
What Adequation Advisory strives to do every day for its clients.