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Whitepaper

A Regulatory Spotlight on Non-Financial Risk

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Oversight and management of non-financial risks has generally not received sufficient attention.

Since the 2008 Financial Crisis, the focus on so-called "non-financial risk" (NFR) has intensified. Many of the world's key regulators, including the UK regulators, have dramatically increased their scrutiny on the management of NFR. The issue is that non-financial risk is harder to manage than financial risk. We have less data on NFR, and so measurement is more complicated. Subjectivity and judgement abound. It is often therefore thrown in the "too hard" basket.

This whitepaper shares some lessons from the Australian experience, which has equal relevance in any jurisdiction. Non-financial risk in London is by and large similar to non-financial risk in Australia. The whitepaper is based on recent work and publications performed by the regulators and government on non-financial risk. Specifically, the Australian Securities and Investment Commission (ASIC) report on “Director and officer oversight of non-financial risk”, that was issued on 2 October 2019.

It takes the findings of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the great work undertaken by the Australian Prudential Regulatory Authority (APRA) on non-financial risk (especially the report on the Commonwealth Bank of Australia) and applies it to the broader corporate world.

In particular, that “oversight and management of non-financial risks has generally not received sufficient attention”.

This whitepaper is laid out in two sections: Firstly, a summary of the key points from the ASIC report and secondly, an overview of the solution to bring your organisation up to speed.

What's Covered

  • A Summary of the ASIC report
  • Risk Appetite: Key Findings and Recommendations
  • Information Flows: Key Findings and Recommendations
  • Board Risk Committees: Key Findings and Recommendations
  • Benchmark assessment against the ASIC report recommendations and best practice
  • Addressing each of the ASIC recommendations

About the Author

David Tattam, Director Research and Training

David Tattam
Director, Research and Training, Protecht
 

David Tattam is the  author of "A Short Guide to Operational Risk" and is recognised internationally as a specialist in all facets of risk management and in particular, enterprise risk management. Prior to founding Protecht in 1999, he held roles as the Head of Operations and Risk Management at two international banks, WestLB and The Industrial Bank of Japan. 

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