Strategic Focus: The Role Of Climate Risk In Enterprise Risk Management

Published 27 July 2023 by Katelyn Johnson & Ryan Skinner &
Climate Change Strategy Net Zero & Climate Risk Physical Climate Risk TCFD Reporting Strategic Focus

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Executive Summary

In late 2021 the Institute of Risk Management provided a framework for considering climate change risks. In this, it stated: “There is widespread consensus that addressing climate-related risks is a critical component of ERM [enterprise risk management] in supporting an organisation in understanding its future risk profile”. The institute also acknowledged the need to have an “early warning system in place” to improve firms’ resilience. Nevertheless, many firms struggle to account for or incorporate climate-related risks into their ERM frameworks. Leaders’ typical compliance-based attitudes prevent them from fully capturing all their climate-related risks. Climate risk professionals face challenges in moving firms beyond compliance mindsets, due to the specific data, analyses and capabilities required to assess climate risk. By focusing on stakeholder engagement and value creation, climate risk professionals can gain support for embedding climate risks into ERM frameworks, thereby building organizational resilience. 

Table of contents

Climate risk: a new juggernaut for enterprise risk management
Today, climate risk is poorly connected to organizations’ ERM strategies
Integrate climate risk into your ERM strategy to futureproof your organization

Table of figures

Figure 1. Definition of climate risk-related terms 
Figure 2. Ripple of climate risks
Figure 3. Climate risk quantification: an iceberg of uncertainty

About the authors

Katelyn Johnson

Principal Analyst
Katelyn is a Principal Analyst in the Verdantix Risk Management practice. Her current research agenda focuses on climate risk and its integration into risk management frameworks. Prior to joining Verdantix, Katelyn was a climate scientist at GNS Science in New Zealand. She has previously held roles in the energy industry, where she helped projects manage risk due to weather and ocean phenomena. Katelyn holds a PhD in Geology from Victoria University of Wellington and an MS in Earth Sciences from Ohio State University – both focusing on climate science – as well as a BS in Meteorology from Texas A&M University.

Ryan Skinner

Research Director, Net Zero & Climate Risk
Ryan is the Research Director for the Verdantix Net Zero & Climate Risk practice. He guides the research team to develop compelling research at the intersection of net zero strategies, carbon management, climate risk and technology. Prior to joining Verdantix, Ryan was a principal analyst at Forrester Research, where he initiated the research into ESG data and analytics offerings. He also has extensive experience of helping software companies with their messaging, positioning, market and technology strategies. Ryan studied at Duke University, the University of Manchester and the University of Oslo, and speaks Norwegian fluently.

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