Non-financial risks (NFR) are all of the

risks In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environme ...

which are not covered by traditional

financial risk Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial ...

management. This negative definition resembles the initial definition of operational risk, and it depends on the

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...

or cooperation whether or not they use the term operational risk synchronously with NFR. Since 2019, the new term NFR became popular in the risk management sector

Examples

Non-financial risks include: * Operational risk (Op risk). In case that Op risk is considered a part of NFR (and not as equivalent), Op risk summarizes e.g. those risks which can be quantified by the use of scenario models. Examples are pandemics, floods and other weather events. * Conduct risk means that the behavior of the cooperation's employees leads to losses * Cyber risk and IT risk are possible losses due to security breaches. * Compliance risks are

related to

Governance, risk management, and compliance Governance, risk management and compliance (GRC) is the term covering an organization's approach across these three practices: governance, risk management, and compliance. The first scholarly research on GRC was published in 2007 by Scott L. Mitch ...

. Managing the compliance risk means putting a price tag on potential failures of adhering to self-given rules of the bank as well as Regulatory compliance. *

Regulatory risk Basel II classified legal risk as a subset of operational risk in 2003. This conception is based on a business perspective, recognizing that there are threats entailed in the business operating environment. The idea is that businesses do not ...

are possible losses due to changes of the law and regulations. *

Reputational Risk Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of s ...

is potential loss caused by the damage to a firm's reputation. All these risk types are closely related. In the case of a data leak (which is a cyber risk incident), the reputation of the company as a whole might be at stake.

References

{{Financial risk Financial risk management