LA Wildfires Uncover Critical Gaps in Risk Management Strategies

Article

The LA wildfires underscore the critical need for Multi-Event Simultaneous Scenario (MESS) planning. This approach highlights how interconnected risks can amplify each other, urging financial institutions and risk managers to rethink traditional strategies and embrace a more holistic view of risk preparedness.

Jan 22, 2025

Craig Spielmann, Risk Intelligence Leader, CNM LLP

Tags: Stress Testing Operational and Non Financial Risk Resilience

LA Wildfires Uncover Critical Gaps in Risk Management Strategies

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The LA wildfires demonstrate the importance of planning for simultaneous risks, showing how compounded events can lead to greater devastation.
Financial institutions face significant challenges from climate events, such as uninsured losses and mortgage defaults, which can destabilize smaller institutions.
MESS planning encourages a shift from addressing risks in isolation to understanding their interconnected nature and broader impact.
Proactive measures, such as firebreaks and floodproofing, are necessary despite their costs, as they help mitigate long-term financial and societal risks.