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Non-financial risks (NFR) are all of the risks which are not covered by traditional financial risk management. [1] This negative definition resembles the initial definition of operational risk, and it depends on the bank or corporation whether or not they use the term operational risk synchronously with NFR.
- An Enhanced Nfr-Governance Framework
- Risk-Management Enablers
- NFR in The Business
In line with regulatory expectations, banks are building a governance model with three lines of defense. The first line owns and manages risks, the second line sets control standards and monitors adherence to them, and the third line—audit—checks on the adequacy of the first two. Whereas all institutions regard the business divisions as the first l...
Banks have a standard set of tools and processes in place to manage NFR, but they are not always up to the job of managing risk effectively. Good NFR management depends on four elements: an integrated risk taxonomy, a control framework focused on prevention, an integrated risk and control assessment that considers emerging risks, and a quantitative...
Even as banks change their approach to risk management to account for NFR, so they must also make a couple of changes in the business. One is a more structured and strategic approach to the remediation of risk. The other entails cultural change.
Feb 28, 2022 · Nonfinancial risks arise from the bank’s operations (processes and systems) and are similar to risks faced by companies outside the financial sector (“corporates”). Over time, corporates have developed approaches to address nonfinancial risk while adapting approaches developed by banks to manage financial risk, which corporates also face.
Sep 9, 2024 · What is non-financial risk? Non-financial risk (NFR) works on an exclusionary basis; in that the term encompasses all of an organizations’ threat events except for those with a direct link to finances.
Jul 1, 2023 · Non-financial risk is operational and strategic risk. These can be summarised as operational risk (including HR, culture & conduct, IT, data & cyber, business disruption, fraud, legal & compliance, assets, and infrastructure), and strategic risk.
The growing importance of non-financial risks, or ‘NFRs’, poses particular challenges for a bank’s finance function, the team traditionally relied upon by senior management, the board, and other stakeholders to understand how risks affect the bottom line.
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If not well managed, non‑financial risks carry very real financial implications for companies, their investors and their customers — particularly if not identified and prioritised early enough. The Corporate Governance Taskforce is one of ASIC’s enhanced supervisory initiatives.
