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ACCA Applied Knowledge · Business and Technology · Environmental and sustainability factors

A coastal hotel chain finds that rising sea levels and more frequent storms are increasing its insurance premiums and repair costs. Which description of this impact is MOST accurate?

This is a physical risk from climate change. Rising sea levels and storms directly damage property and raise insurance and repair costs. Transition risk would instead come from policy, legal or technology changes in moving to a low-carbon economy, and no reputational issue from staff relations is described.

  1. AA physical risk arising from climate changeCorrect
  2. BA transition risk arising from a change in law
  3. CA reputational risk arising from poor employee relations

Explanation

Physical risks are direct damage and disruption from climate events such as storms and sea-level rise. Transition risks arise from the shift to a low-carbon economy, such as new laws or technology. Nothing here concerns employee relations.

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