Exam SCR topic 1 question 80 discussion

Actual exam question from GARP's SCR

Question #: 80
Topic #: 1

An EU juice producer heavily relies on Brazil’s supply of oranges to produce its top-selling orange juice brand. The producer anticipated steady growth, but production decreased due to the rise in mean temperature in Brazil.
The climate-related risk of mean temperature rise in Brazil increases what indirect effect?

A. The chronic market risk of a temperature rise disrupts the supply chain for oranges, reversing the significant asset write-offs for the juice producer.
B. The chronic physical risk of a temperature rise decreases the production of oranges and subsequently negatively impacts the profits of the juice producer by reducing the production of the juice brand.
C. The acute reputational transition risk of a temperature rise decreases production due to health-related issues with workers in Brazil, leading to reduced demand for the juice brand.
D. The acute physical risk of a temperature rise disrupts the supply chain for oranges, creating financial losses for the juice producer due to its inability to honor its supply contracts.

Show Suggested Answer

Suggested Answer: B 🗳️

by Karnitschnig at April 15, 2023, 7:54 a.m.

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kavvv

10 months ago

Seems like all the answers are wrong shomehow. The q's asked for an indirect impact. B is describing a direct impact. Increased temp > reduced production of oranges > lower profits. C would be more appropriate if it didn't have 'acute' in it. Increased temps > worsened working conditions impacting worker's health > indirectly results in reputational risk to the company due to consumer's awareness

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