Non-Financial Risk Management: Emerging stronger after Covid-19
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Conduct risk and the impact of Covid-19
Andrew Sheen and Peter McCormack
Foreword
Preface
Introduction
Introduction to Part I: The origins of non-financial risk management
The complete history of operational risk regulation (abridged)
Financial institutions and non-financial risk: Learning from the corporate approach
The painful financial side of NFR
“Risk management is about managing risk” and “It’s all about people”: Psychology might be more important than models
The confusion of Babel: What’s in the name NFR – taxonomy
Introduction to Part II: Governance of non-financial risk management
“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
Do you know who is who? Three lines of defence in the context of NFR
Herding cats? NFR divisions as truly diverse units
“Just do it!”: Partially self-organising governance structures for NFR frameworks
Introduction to Part III: Tools and instruments for non-financial risk management
A risk by any other name: Identification, classification and agendas
Old but gold? Mastering the RCSA despite Covid-19
Biases in scenario analyses and how to mitigate them
When scenarios are not severe enough: Stress testing for non-financial risk
Ending NFR in NFR: From Excel sheets to professional IT systems for NFR management
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
It won’t be over after Covid-19: Pandemics and operational resilience
Dealing with IT complexity and innovation: Delivering business resilience and customer outcomes
Protecting the new gold: Information security
Conduct risk and the impact of Covid-19
From lawsuits to models: Compliance risk and financial crime
Others are doing it cheaper: But can they really? Opportunities and risks in outsourcing
Managing reputation and stakeholders
Introduction to Part V: The future of non-financial risk management
ESG risk as a new (and very important) trigger for NFR
Looking into the crystal ball: What will NFR management look like in 2030?
This time will be different: An alternative future of NFR management
Right time, right place: The drive for change in operational and non-financial risk
It is difficult, if not impossible, to think of an element of everyday life that has not been impacted by the Covid-19 pandemic in one way or another, including conduct in financial institutions. To understand the impact of Covid-19 on conduct, we must first examine the notion of conduct as a risk and the way in which its perception in financial institutions has changed since the 1980s. This inevitably leads to a discussion of some of the reasons for that change and acknowledgement of the conduct concerns that were evident. In addition, this chapter will also address the attempts by regulators to resolve the issue and some more recent developments in the UK.
We then focus on the impact Covid-19 has had on conduct in many financial institutions and how specific conduct issues were impacted by the pandemic. In particular, the chapter focuses on three key impacts of Covid-19: the risks from the acceleration of customer’s online activity; the increasing number of staff working from home; and the risks to customer’s data and firm data. Finally, we draw out what this means for firm’s management of conduct and how conduct changes should have impacted the management of operational risk
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