Key non-financial factors for investment

Non-financial factors to consider include:

• meeting the requirements of current and future legislation
• matching industry standards and good practice
• improving staff morale, making it easier to recruit and retain employees
• improving relationships with suppliers and customers
• improving your business reputation and relationships with the local community
• developing the capabilities of your business, such as building skills and experience in new areas or strengthening management systems
• anticipating and dealing with future threats, such as protecting intellectual property against potential competition

For example, you might need to take into account the environmental impact of a potential investment. To some extent, this may be reflected in financial factors, eg the energy savings offered by new machinery. But other effects - such as the effect on your reputation - will also be important.

For both financial and non-financial institutions alike, non-financial risk management has become more challenging due to the added complexity from rapid shifts in technology, extensive process automation, and greater dependence on systems instead of people. These changes have led to new risk exposures.

Given multiple pressures from stakeholders, the industry has rapidly responded by building out non-financial risk management capabilities.

Most organizations now have numerous specialist teams dedicated to the management of various non-financial risks, often with overlapping remits and different chains of command.

With risk-control-siloed functions, each having its risk-identification processes, reporting structures, and IT systems, the result is duplicated work as well as costs. Organizations feel they are drowning in parallel efforts aimed at identifying, assessing, and remediating risks with the same individuals being approached over and over again, and diluting scarce resources and attention from operating the business.