Avantage Reply assisted a UK subsidiary of an Asian G-SIB with an independent review of its stress-testing methodology for financial risks arising from climate change.
The client requested Avantage Reply to review and challenge the effectiveness of their stress testing methodologies used to assess the financial risks posed by climate change. The engagement included the assessment of the firm’s existing stress testing methodologies and addressing any identified gaps.
Avantage Reply conducted an in-depth review of the client’s existing processes and methodologies to identify financial risks associated with Physical and Transition risks.
During the project, Avantage suggested alternative approaches and data sources for the implementation of the stress testing process, detailing the benefits and drawbacks of each option.
Based on the outcome of the assessment of their current processes and methodologies, Avantage provided the client with a comprehensive report detailing the observations and articulating specific recommendations for potential enhancements.
Finally, a workshop with all relevant stakeholders was conducted, to provide a view on potential areas in the stress testing methodologies where further developments and enhancements can be implemented to better quantify their climate change risk exposure.