Risk management is fundamental to achieving our business goals and requires a culture of operational discipline. We make risk-informed decisions that reflect our culture of embedding sustainability considerations and are governed by our guiding principles for risk management.
Climate risks and opportunities are embedded throughout our management and Board of Directors organizational structure and processes, including strategy development, business planning, risk oversight, scenario analysis, executive compensation, skills development and external engagement. As well as, likelihood and consequence, along financial, regulatory, reputational, safety and environmental dimensions.
We consider key transition risks, such as new policies and regulations, evolving market forces and changes in consumer preferences, using future scenarios and the integration of carbon pricing into strategic plans and capital allocation decisions.
We use three energy future scenarios to 2050 and a 2°C scenario to 2100 to test and assess the resilience of our business strategy against inherent uncertainty. All scenarios are developed using distinct, challenging, relevant and plausible world trajectories that illustrate a wide range of outcomes. The three energy future scenarios to 2050 are typically updated annually and use variables adjusted in a consistent manner, including demographics, economics, environment, geopolitics, legal, social and cultural, and technology.
Alongside our scenarios, we annually update signposts and milestones that identify critical shifts in the external context. The world continues to change, often unpredictably. Tracking the pace and direction of change is an integral part of our scenario work and helps us develop and evaluate alternate strategies for our business by incorporating both global and Canadian current events, trends and actions.
Our scenarios are used by the executive leadership team and the board to assess our business strategy and identify alternate strategies. They are also used by internal teams to evaluate projects and opportunities. The scenarios are not used as forecasts or predictions. This process continues to be a useful tool for stress-testing our business on several key dimensions, including climate risk.