Non-Financial Risk Management: Emerging stronger after Covid-19
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The complete history of operational risk regulation (abridged)
Marcus Haas
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
“Hahaha, that can never be done”. Two decades of operational risk research and regulation later, I can still remember being told that. I was a young researcher at the time, working as a market risk model developer at a German research foundation. In mid-2001, during my second year of work, I decided to broaden my horizons and attended a risk management seminar that covered all types of banking risks: market risk, credit risk and, something I had never heard of, operational risk. The presenter, a senior manager at a small German advisory company, gave a presentation on operational risk, explaining it was the “next big thing” and that banks would soon face large losses if they did not adequately manage their operational risks. During the break, I introduced myself and told him I was a mathematician and researcher, and that it would be interesting to try to find models for operational risk, just like there were models for credit and market risk. And then he said it: “Hahaha, that can never be done”.
My motivation then was the same as it still is today: why would you want to neglect a risk that all banks are facing and which could have disastrous outcomes? At the time, much work
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