Non-Financial Risk Management: Emerging stronger after Covid-19
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Old but gold? Mastering the RCSA despite Covid-19
Jonas Hampl and Johanna Sax
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
“Risks? We don’t have any risks!” is a response probably every risk professional hears occasionally; in particular, while explaining that a risk and control self-assessment (RCSA) is imminent. Despite involving a certain degree of irony, this statement often marks the beginning of a rather tedious exercise for the risk professional with a counterpart that is profoundly uninspired to think about the risks of our daily work.
The reluctance to fully accept an exposure to risks is not uncommon. In fact, powerful cognitive forces, known to science for centuries, are at play. For instance, people tend to overestimate their control over uncertain events. This misjudgement is called “illusion of control” and is maybe best exemplified by the belief of study subjects to have higher chances of winning the lottery if they pick the numbers themselves (Langer, 1975). In addition, people tend to overestimate the probability of positive life events happening to them while underestimating the likelihood of falling victim to negative ones, which is known as optimism bias. For instance, we find it disproportionately likely that our children will turn out exceptionally gifted and will somehow be
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