From climate signal to decision context

Assess the risk without hiding the uncertainty.

Physical climate risk emerges through the interaction of hazards, exposed people or assets, vulnerability and the channels through which disruption becomes a financial or operational effect. A useful assessment makes each part of that chain visible and proportionate to the decision being supported.

Arocha & Associates applies a structured assessment approach informed by the practical six-step framework published by the NGFS and World Bank, tailored to the organisation’s sector, geography, asset profile, data and technical maturity.

Three analytical lenses

Make the transmission pathway explicit.

H

Hazard

Identify the relevant acute and chronic hazards, time horizons, scenarios, geographic resolution and limitations of the underlying climate information.

E

Exposure & vulnerability

Map the assets, operations, people or portfolios that may be affected and the characteristics that influence the severity of potential impacts.

F

Financial translation

Evaluate the channels through which physical effects may influence losses, costs, operations, value, capital, resilience or strategic choices.

NGFS-informed assessment cycle

Six steps from objective to interpretation.

The steps are iterative: data constraints, scope choices and emerging results may require the assessment to revisit earlier decisions.

  1. 01

    Define the need

    Clarify the decision, audience, time horizon, material exposures and intended use.

  2. 02

    Review resources

    Identify available climate, exposure, vulnerability, loss and business information.

  3. 03

    Set scope

    Choose hazards, geographies, scenarios, methods, granularity and assessment boundaries.

  4. 04

    Build scenarios

    Select or develop scenario information appropriate to the hazards and decisions in scope.

  5. 05

    Estimate impacts

    Assess physical effects and translate them into operational or financial implications.

  6. 06

    Interpret results

    Communicate findings, assumptions, uncertainty, limitations and decision implications.

Our approach

Analytical discipline with business relevance.

01

Proportionate methods

Match analytical sophistication to materiality, data, decision needs and available resources.

02

Transparent judgement

Document assumptions, expert judgement, uncertainty, caveats and methodological limitations.

03

Decision-useful communication

Present results in forms that management, boards and technical teams can interpret and use.

Typical outcomes

A clearer view of where physical risk can matter.

A prioritised view of material hazards, exposures and vulnerable areas.
Documented scenarios, methods, assumptions, uncertainties and limitations.
Estimated operational and financial transmission pathways.
Decision-ready findings for risk management, strategy, resilience and reporting.

Methodological reference: Network for Greening the Financial System and World Bank, Physical Climate Risk Assessment: Practical Lessons for the Development of Climate Scenarios with Extreme Weather Events, September 2022.

Start with the exposure

Which assets, operations or portfolios could be most vulnerable?

We can help frame the assessment, evaluate available data and define a proportionate first step before committing to a complex modelling exercise.

Discuss a physical-risk assessment Back to Climate Risk Advisory