COVID-19 triggers great nonfinancial risk crisis: Nonfinancial risk management best practices in Canada

Abstract

The spread of viral disease COVID-19 is the most transformative nonfinancial risk (NFR) of this decade triggering the Great Nonfinancial Risk Crisis. The uniting of strategy and risk management has never been more crucial for financial institutions. The interrelationship between the pandemic and the increases in ageing, chronic diseases, interstate conflicts, nationalism, cyber attacks, cyber dependency, asset bubble, and sovereign debt is transforming our reality in previously unimaginable ways. NFR management best practices Canadian Financial Institutions (FIs) prioritised NFR and adopted a NFR framework that enabled them to identify the spread of viral disease (COVID-19). Then they reprioritised COVID-19 risk into their existing enterprise risk management framework to reduce the exposure and impact of the pandemic and re-evaluated their strategic assumptions to reset their business strategy in light of the reprioritised risk matrix. In this paper, the author reviews best practices in managing NFRs and trends from the practitioner’s point of view. Thirteen Canadian FIs are reviewed along with their positioning of NFR pre- and post-COVID-19, and their recent enhancements to their NFR-management process. The author illustrates how the adoption of the Global Risks and Trends Framework by several Canadian FIs has influenced their preparation and resilience in this pandemic. Finally, the author discusses best practice examples, as well as challenges that still exist, how organisations have adjusted their strategy linking risk to their recent experience, and what lessons other FIs can learn about managing these NFRs.