Non-Financial Risk Management: Emerging stronger after Covid-19
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Managing reputation and stakeholders
Ariane Chapelle and Carmen Rollins
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
Reputation damage is one of the worst consequences of non-financial risk events. All the organisations we have met and worked with over the years include a “reputation impact” category as part of the risk assessment matrix, and, when interviewed, many mention reputational impact as a dire consequence of operational risk events as diverse as fraud, systems disruptions, compliance breach or even processing errors.
Yet none of these organisations either defines reputation impact or reputation risk with any precision. For many firms across the financial industry, reputational damage is simply synonymous with adverse press coverage, whether local or international. Furthermore, we have not met any financial services company, or an international financial organisation, that has attempted to measure the impact of reputation damage on the behaviours of stakeholders such as customers, regulators or staff. This lack of focus, structure and measurement, including clear definitions of reputation as an impact versus reputation risk, is puzzling.
This chapter proposes a new framework from the management of corporate reputation. Inspired by the risk management cycle, it focuses on the
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