Herding cats? NFR divisions as truly diverse units

Sebastian Rick

Contents

Foreword

Preface

Introduction

Introduction to Part I: The origins of non-financial risk management

1.

The complete history of operational risk regulation (abridged)

2.

Financial institutions and non-financial risk: Learning from the corporate approach

3.

The painful financial side of NFR

4.

“Risk management is about managing risk” and “It’s all about people”: Psychology might be more important than models

5.

The confusion of Babel: What’s in the name NFR – taxonomy

Introduction to Part II: Governance of non-financial risk management

6.

“It’s the culture, stupid”: Risk culture as the key building block of NFR management – and why some banks have come through the Covid-19 pandemic better than others

7.

Do you know who is who? Three lines of defence in the context of NFR

8.

Herding cats? NFR divisions as truly diverse units

9.

“Just do it!”: Partially self-organising governance structures for NFR frameworks

Introduction to Part III: Tools and instruments for non-financial risk management

10.

A risk by any other name: Identification, classification and agendas

11.

Old but gold? Mastering the RCSA despite Covid-19

12.

Biases in scenario analyses and how to mitigate them

13.

When scenarios are not severe enough: Stress testing for non-financial risk

14.

Ending NFR in NFR: From Excel sheets to professional IT systems for NFR management

15.

Breaking up with risk management: Using the power of controls for good not the prevention of evil

Introduction to Part IV: Focus areas of non-financial risk management

16.

It won’t be over after Covid-19: Pandemics and operational resilience

17.

Dealing with IT complexity and innovation: Delivering business resilience and customer outcomes

18.

Protecting the new gold: Information security

19.

Conduct risk and the impact of Covid-19

20.

From lawsuits to models: Compliance risk and financial crime

21.

Others are doing it cheaper: But can they really? Opportunities and risks in outsourcing

22.

Managing reputation and stakeholders

Introduction to Part V: The future of non-financial risk management

23.

ESG risk as a new (and very important) trigger for NFR

24.

Looking into the crystal ball: What will NFR management look like in 2030?

25.

This time will be different: An alternative future of NFR management

26.

Right time, right place: The drive for change in operational and non-financial risk

European banks and their customers are increasingly benefiting from the application of information and communications technology (ICT) in financial services, even though its increased use is associated with new risks. Some of the most predominant non-financial risks (NFRs) that banks are facing result from vulnerabilities and threats related to the rapid adoption of, and increased dependency on, ICT for the provision of financial services, as well as the European financial sector’s growing reliance on outsourcing to third parties (eg, cloud service providers).

The outbreak of the Covid-19 pandemic in 2020 exacerbated these NFRs and increased economic and business uncertainty. At the same time, ICT and outsourcing to third parties have supported the continued delivery of financial services to customers and promoted the ability of banks to continue business operations during the pandemic. To adapt to this evolving NFR landscape, banks are advised to create truly diverse non-financial risk units, as this chapter will show using the examples of operational risk management, outsourcing management, business continuity management (BCM) and IT governance.

By linking the various

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