non financial risk management
Non-financial risks include all risks that are not explicitly financial in nature. Their categories are not always clear-cut and also require different approaches. This calls for careful integration.
Non-financial risks include all risks that are not explicitly financial in nature. Their categories are not always clear-cut and also require different approaches. This calls for careful integration.
Non-financial risks, or NFR for short, have become much more important than traditional risk types in recent years. Breaches of legal, regulatory and ethical requirements, failures of IT services or service providers can have a serious impact on the reputation of an institution, but also on business operations themselves. As a result, a number of risk management approaches have emerged in recent years, some of which are heterogeneous, and their coexistence represents a challenge for the consistent assessment and management of an institution's risk situation.
The inclusion of ESG risks in the MaRisk in 2023, the discussions about the omnibus procedure CSRD and CSDDD, the new greenwashing requirements under the EmpCo Directive, the spot checks of SFDR reports by BaFin, the reviews of the SFDR reports by BaFin and other ESG-related supervisory priorities for the year 2025 mean that the topic of ESG risks is becoming ever more extensive and important for financial institutions.
With DORA, NIS2 and CRA, the regulatory pressure on companies pressure on companies in almost all sectors and their their supply chains to implement effective security measures and set up risk management systems. In addition to technical and organisational measures of common standards standards, the supervisory authority is calling for resilience.
On 29 November 2024, BaFin published its AuAs on the GwG was revised and published and brings far-reaching changes for the obliged institutions with it. In addition, at EU level level, an authority to combat money laundering and (AMLA) was established at EU level, and national national AML regulations were harmonised and tightened by the AML Regulation.
Although the 8th MaRisk amendment 2024 does not contain any specific changes in the area of fraud risks, the topic of appropriate risk management to avoid NFR is likely to become more important for BaFin.
gain in importance. In the area of customer monitoring financial institutions have an increased need to catch up, particularly with regard to the use of AI.
NFR are complex and diverse. Banks are subject to the national and international requirements of micro- and macroprudential financial supervision. Violations or misinterpretations of regulatory requirements in turn constitute an NFR themselves.
The risk from outsourcing and the third parties third parties involved is becoming increasingly complex for financial increasingly complex, not only since the reporting obligation for outsourcing since 2022, but also due to the BaFin has explicitly addressed the topics of default risk the topics of default risk of multi-client service providers, concentration among service providers and and onward outsourcing.
Our approach aims to bracket the various aspects of non-financial risks within an efficient methodological framework. The advantages are obvious:
- The risk assessments become comparable
- Redundancies in the reporting of risks can be avoided
- Responsibilities and accountabilities are more clearly defined
The procedure can be roughly divided into the following steps, which may vary depending on the specific organisational structure and business model.
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