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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management

Kaveri Cement Ltd. has plants on the Odisha coast. A cyclone last year shut down one plant for three months and damaged its jetty. The board wants to classify this risk correctly in its climate risk register. Which classification is correct?

It is an acute physical risk. A cyclone is a discrete, event-driven climate hazard that damages assets and interrupts operations. Chronic physical risk refers to gradual shifts like sea-level rise or sustained higher temperatures, and transition risks relate to policy, technology or market changes.

  1. AChronic physical risk
  2. BAcute physical riskCorrect
  3. CTransition policy risk
  4. DTransition technology risk

Explanation

Acute physical risks are event-driven, such as cyclones, floods and heatwaves. Chronic physical risks are longer-term shifts such as rising sea levels or sustained temperature rise. A one-off cyclone causing shutdown is acute; calling it chronic would confuse event-driven with gradual change.

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