Content by Topic: Financial Risks

Financial risks like credit, economic and market risk are areas of focus for GRI. Although higher-profile risks like climate and geopolitics sometimes overshadow them, financial risks are more immediate for financial institutions (FIs), and FIs tend to have a greater ability and more direct methods to manage financial risks.

From the perspective of financial institutions, even so-called non-financial risks ultimately manifest as financial risks. For example:

• Geopolitical events can affect supply chains, which can destabilize businesses and lead to credit risk exposure for banks and other lenders.
• Climate change, which has generally been seen as a longer-term risk, is already leading to physical losses from hurricanes, floods and wildfires that are increasing claims costs for insurers, and could lead to liquidity concerns.
• The transition to low-carbon alternatives affects asset values in carbon-intensive industries and may require FIs to modify their investment portfolios.

While GRI knows that the world of risk is ever expanding for financial institutions, we also recognize that financial risks continue to present a significant and ongoing threat to the stability of the financial system. As such, GRI will continue to focus on events, education and research that put these risks front and centre.