University Project: Risk Management Analysis in Financial Economics

This project delves into the intricacies of risk management within the financial sector, specifically focusing on the impacts of climate change and carbon emissions. The analysis begins with an overview of risk management processes, emphasizing the identification and evaluation of risks for improved economic outcomes. It then examines climate risk, explaining its dependence on carbon emissions and its effects on global temperatures, human health, and various industries like agriculture, healthcare, and real estate. The project explores how climate change affects industries, leading to financial losses and operational issues. Furthermore, it investigates how climate change poses risks to the financial system, potentially impacting the economy and requiring financial support for affected industries. The project also touches upon the need for transitioning to net-zero carbon emissions, incorporating policies, and assessing future perspectives on how industries should adapt to these changes. The conclusion highlights the importance of the financial sector in developing tools to reduce carbon emissions. The assignment includes a PowerPoint presentation and a one-page write-up, analyzing the article through the lens of financial economics, offering interpretations of the events, and integrating concepts covered in the module. It also provides a list of references supporting the analysis.

Risk Management

Introduction
Risk management mainly points out the process of identification and evaluation of risk that
are followed by economic application for better outcomes. This study focuses on the
financial sector that amplifies the positive impact of new carbon emission policies.

Climate risk explanation
 The risk of climate mainly depends on the emission of carbon which forces to risk in
global temperature.
 This affects the overall health of humans and other living beings and this is required to
be controlled.

Climate risk affected industries
 The affected industries by climate risk puts negative impact on the agriculture, health
care, real estate, tourism and others.
 The infrastructure of these industries are severely affect the climatic changed that are
taking place in recent years.
 Drought lead to damage of the crops and rise of global temperature increases the
overall cost which affect the financial health of the industries.

Climate change risk
 The risk with climatic change affects the local industries that are operating in the
country by declining their financial health and growth.
 The growth and development of the industries are also affected by change in climate.
 The global industries also faces issues with their operation due to change in climate
which leads to financial loss and other issues.

Influencing banks or financial system
 Change in climatic condition poses the risk of financial system which would potentially
affect the economy.
 As the operation are affected by change in climatic condition the overall financial
health would also get affected.
 Banks would have to be provide extra financial support to the affected industries for
resuming the normal business operation.
 The developed countries such as UK, Germany and USA would be affected at most as
their government are directly involved with the industries.

Changes required
 The transition is to be incorporated which would help to bring down the net zero
emission of carbon.
 Different policies is required to be incorporated which would help in reducing the
overall emission of carbon.

Future perspective
 The industries is required to freeze their financial statements that help in investigating
the mode of operation of the borrowers.
 The time when the borrowers are ready to meet the changes in the economic by shifting
zero net carbon emission.

Conclusion
 From the above study, it can be concluded that the carbon emission is the main thing
for which the global climate is rising. The financial sector plays an important role for
developing the tools that would help in reducing the overall rate of carbon emission.

Bibliography
 Carney, M., 2015. Breaking the Tragedy of the Horizon–climate change and financial
stability. Speech given at Lloyd’s of London, 29, pp.220-230.
 Fawcett, T. and Parag, Y., 2017. An introduction to personal carbon trading. In Personal
Carbon Trading (pp. 329-338). Routledge.
 Heffernan, E., Pan, W., Liang, X. and De Wilde, P., 2015. Zero carbon homes:
Perceptions from the UK construction industry. Energy policy, 79, pp.23-36.