The future of non-financial risk in financial services

The future of non-financial risk in financial services

Risk management is at an inflection point with regulatory authorities placing greater emphasis on managing non-financial risks (NFR) such as non-compliance, misconduct, and cyber risk. Financial institutions need to implement a holistic risk management framework that includes a comprehensive risk taxonomy describing different types of risks, and a robust risk identification process to assess and mitigate non-financial risk across all lines of defense.

Deloitte Global’s latest report, co-developed with the Deloitte Banking Union Centre in Frankfurt, examines the challenges posed by non-financial risk and discusses four levers which can enhance non-financial risk management. These levers are:

Strategy: Incorporate non-financial risk into the organization’s business strategies and risk appetite, while establishing appropriate metrics and risk limits

Three lines of defense: Reassess the risk governance model to clarify the responsibilities of each line of defense in managing non-financial risk

People and culture: Hire or develop additional skills in areas like cyber risk, and build a culture where employees recognize the importance of managing non-financial risk

Emerging technologies: Leverage new technologies like big data, robotic process automation, and predictive analytics to identify risks, while reducing compliance costs through automation.

The report also highlights how risk identification and taxonomy are likely to evolve in the future of risk environment.

Read this report to see what controls are required to manage a specific portfolio of risks, and how you can develop an integrated framework for non-financial risk management.

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