Managing compliance, operational, digital, AI and sustainability risks has become increasingly critical for businesses in the financial services industry. Furthermore, expectations by regulators are ever more demanding, while monetary sanctions are being scaled up. Accordingly, non-financial risk (NFR) management requires sophistication in various aspects of a risk management system.

This handbook analyses a major success factor necessary for meeting the requirements of modern risk management: an institution-specific target operating model – integrating strategy, governance & organisation, risk management, data architecture and cultural elements to ensure maximum effectiveness. Fully updated to reflect the latest regulatory and industry developments, the second edition features two brand-new chapters on the deployment of (Gen) AI in non-financial risk management and cyber resilience in financial institutions.

The book has been written by senior NFR experts from key markets in Europe, the US and Asia. It gives practitioners the necessary guidance to master the challenges in today's global risk environment. Each chapter covers key regulatory requirements, major implementation challenges as well as both practical solutions and examples.



Editors

Contributors

Foreword



1 Introduction: Rising to the Challenges of Non-Financial Risk Management



2 Definition of Non-Financial Risk in Financial Institutions



3 Risk Boundaries – Setting an Analytical Risk Appetite Framework for Non-Financial Risks



4 The Three Lines of Defence Model: Key Success Factors for Effective Risk Management



5 Global Functional Lead in Non-Financial Risk Management: Ensuring Consistency and Integration in Complex Organisations



6 Policies and Procedures: Framework and Governance Requirements in the Financial Sector



7 Top-Down Risk and Control Assessment: A Forward-Looking Approach to Evaluate Company-Wide Non-Financial Risk Exposure



8 A Top-Down Approach to Non-Financial Risk Reporting: Collaboration Across Risk Types for Sustainable Risk Steering



9 Internal Investigations into Corporate Misconduct: Applying an Investigative Approach to Enable Proactive Risk Oversight



10 Technical Application and Data Architecture for Non-Financial Risk Management



11 Data Governance in Non-Financial Risk Management



12 Optimizing Effectiveness and Efficiency: Deployment of Artificial Intelligence in Non-Financial Risk Management



13 Enhancing the Cyber Resilience of Financial Institutions



14 Core Elements of Conduct and Ethics in the Context of Non-Financial Risk



15 Managing Conduct Risk: Framework and Perspectives



16 A Holistic Approach to Sustainability Risk Management in Financial Institutions– A Global Perspective



Bibliography