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Transition Risks

‘Transition Risks’ refer to the potential economic, financial, and social challenges associated with the shift to a low-carbon economy and sustainable business practices.

These risks can include stranded assets, regulatory changes, shifts in consumer preferences, and market disruptions. Understanding and managing transition risks is essential for businesses and industries as they navigate the changing landscape of energy and environmental policies.

Such risks result from potential challenges and uncertainties that arise when an organisation undergoes significant changes, such as shifts in technology, regulations, market conditions, or business models and can impact an organisation’s operations, financial performance, and reputation. Identifying, evaluating, and managing transition risks is crucial for ensuring the resilience and success of the organisation. Managing transition risks will include:

  • Regular monitoring and analysis of external factors, such as regulatory changes, technological advancements, market trends, and geopolitical development.
  • Preparation of scenarios that depict potential future states and the effect of different transition factors.
  • Consulting with internal and external stakeholders.
  • Impact Assessment of transition risks on operations, financials, strategic objectives, and reputation.
  • Probability Analysis of the likelihood of different transition risks materialising. This helps prioritize risks for further attention.
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