‘It’s the economy’: forecasting an op risk climate change spike

The history of op risk suggests the economic impacts of climate change could exacerbate losses, writes op risk head

Climate change is coming – and it should be a big wake-up call for operational risk.

In the summers of 2014 and 2015, the meteorological effects of El Niño – which produces heavier rains and warmer weather in South America, but drier weather in South-east Asia – meant monsoons were later and less forceful than usual. It caused a 13% drop in pea production and a 70% increase in the price of chickpeas in India by the end of 2015 (see figure 1).

And, while op risk’s past behaviour suggests that