RISK MANAGEMENT
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Our Risk Management framework Our Risk Management framework is developed and maintained by our ERM team, and encompasses risk culture, risk governance, risk appetite, and risk management policies, processes and tools. Our framework guides us in prudent and measured risk-taking aligned with our strategic objectives, which include an effective balance of risk and reward. We actively evaluate existing and potential risks to develop, implement and continually enhance appropriate risk mitigation strategies.
Independent assurance of risk and control environment by Internal Audit
CWB’s strategic growth objectives
CWB’s Risk Culture
Refer to pages 41 – 57 of our 2023 Annual Report to learn more about our Risk Management framework.
Integrating climate risk Climate risk is a subset of environmental risk that encompasses the risk of financial loss or reputational damage that results from the physical and transition impacts of climate change, which may adversely impact our operations, or the operations of our clients. • Transition to a lower-carbon economy may entail extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. Depending on the nature, speed, and focus of these changes, transition risks may pose varying levels of financial and reputation risk to organizations over time.
• Physical risks related to climate change can be event-driven or due to longer-term shifts in climate patterns. Physical risks may have financial implications for organizations, such as direct damage to assets and indirect impacts from supply chain disruption.
We continue to work with internal and external partners to integrate climate risk into our Risk Management framework and enhance our capabilities to identify, assess, measure, manage, monitor and report its impacts. In 2023, we completed an initial industry-level heatmap assessment to identify the physical and transition impacts of climate change within our lending portfolios (see page 64 ). We will continue to leverage the heatmap activity in 2024, along with guidance provided by regulators to develop key risk indicators for the Risk Appetite. The integration of climate risk into our Risk Management framework is a complex, multi-year undertaking. The steps we have taken in 2022 and 2023 to initiate the integration of climate risk into our Risk Management framework are foundational, however, we recognize we have further work ahead to advance our ability to identify, assess, monitor and report on the direct and indirect impacts of climate risk. Identifying, assessing and managing climate risks CWB recognized climate risk as a top emerged and emerging risk starting in 2022. Climate risks continue to evolve and emerge driven by Canada’s commitment to transition to net-zero emissions by 2050 and the physical risks associated with severe weather events, which could result in a broad range of impacts on our business or the businesses of our clients. In addition to the potential for elevated credit, operational and strategic risks driven by climate factors, legal, regulatory or reputation risks could also arise from our and our clients’ planned approach to address climate change.
66 2023 SUSTAINABILITY REPORT AND PUBLIC ACCOUNTABILITY STATEMENT
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