Physical Risks

Definition

Physical Risks. All global economic enterprise depends on the functioning of earth systems, such as a stable climate and ecosystem services, such as the provision of biomass (raw materials). Nature-related physical risks are a direct result of an organisation’s dependence on nature.

Physical risks arise when natural systems are compromised, due to the impact of climatic events (e.g., extremes of weather such as a drought), geologic events (e.g., seismic events such as an earthquake) events or changes in ecosystem equilibria, such as soil quality or marine ecology, which affect the ecosystem services organisations depend on. These can be acute, chronic, or both.

Nature-related physical risks arise as a result of changes in the biotic (living) and abiotic (non-living) conditions that support healthy, functioning ecosystems. Physical risks are usually location-specific. Nature-related physical risks are often associated with climate-related physical risks.