Climate Risk Assessment
and Management

A comprehensive framework to advert,
minimise and address loss and damage

Risk Analysis

Risk Analysis involves investigating the risk components (hazards, exposure, vulnerabilities) to understand their interrelation and the resulting direct and cascading impacts. Impact chains are the central tool for the risk analysis (see an example in the figure below). A focus of the risk analysis phase should be to understand the drivers of risks (including external risk drivers) and to identify hot-spot regions, critical constellations, and a set of key risks. The risk analysis phase also addresses adaptation gaps and missing capacities. Risk analysis includes the assessment of the magnitude/severity of consequences of risk (current, future) and the selection of key risks. Uncertainties must always be addressed (including a final confidence assessment). Confidence refers to the robustness of a finding based on the type, amount, quality and consistency of evidence (see also: IPCC AR6 WGII report).

Example of a complex impact chain for three interconnected systems

First, you will develop impact chains for relevant risks within each system. Impact chains serve as tailor-made conceptual models of risks and their drivers. They form the foundation of the risk analysis process in the Climate Risk Sourcebook. The risk analysis, which can be qualitative, hybrid, or quantitative, follows the logical framework established by these impact chains.

The development of impact chains is best initiated by co-developing preliminary impact chains with stakeholders and experts in a workshop back-to-back with, or as part of, a risk identification workshop. This participatory approach helps to incorporate diverse perspectives and address existing inequalities and external drivers that influence the vulnerability of various stakeholders or social groups. It is important to identify the drivers and root causes of vulnerability as well as climate risks to the system and the subsystem, reflect on gaps in risk management and to identify entry points for adaptation options.

In the second step you will consider interlinkages between systems. When creating impact chains, it is crucial to consider the cascading effects throughout the system. Climate-related hazards can directly impact the environment, such as water availability, which in turn indirectly affects human systems, like the agricultural sector. By conceptualizing these cascades, it becomes possible to identify risk management and adaptation options that can disrupt the chain of effects. This approach is particularly useful for understanding and addressing specific compound hazards.

Subsequently, you should reflect on gaps in risk management and entry points for potential adaptation options in the impact chains, this can be done during the collaborative development of impact chains. While adaptation efforts often target general vulnerabilities, they can also address specific impacts or subsystems. Adaptation measures can even mitigate exposure, for example by relocating individuals residing in floodplains or coastal areas to higher regions.

In the fourth step, you will collect data and indicators for components and factors of the impact chains. This step is crucial for conducting a thorough risk assessment. It involves defining indicators if conducting a comprehensive assessment using composite indicators or  identifying key impacts if conducting a qualitative, expert-based assessment. Even for a risk screening, which is based on evidence and can potentially lead to a more detailed assessment, it is important to create an overview of factors, data sources, and knowledge gaps. These knowledge gaps can be addressed by gathering missing information through structured interviews with experts and stakeholders or targeted household surveys.

Next, you will describe and analyse impacts and risks along the impact chains and report your findings in a separate chapter on cascading impacts and risks across subsystems. Aggregate the assessment of risk drivers and the potential for severe consequences, with the aim to summarise, assess and classify the magnitude of the risk drivers and the potential for severe consequences in a structured and standardised way. This will become part of the risk analysis report.

Navigate through the modules by clicking on the graphic below: