The report highlights the challenges faced by financial institutions in undergoing large-scale risk transformations. These transformations require coordination across business areas and functions and can be particularly challenging when non-financial risks (NFRs) are involved. NFRs can arise from various sources, including shifting customer expectations, changes in regulations, external attacks, and natural disasters. The report provides examples of the impact of NFRs, such as the misselling of payment protection insurance in the UK and fraudulent account openings in North America. The authors emphasize the importance of a combination of heart, art, and science in successful risk transformations. Heart involves the motivation and commitment of stakeholders to drive change, art involves the ability to navigate complex cultural and organizational dynamics, and science involves the use of data and analytics to inform decision-making. The authors suggest that organizations that can effectively manage NFRs and coordinate risk management across business areas and functions are more likely to succeed in their risk transformations.
