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Breaking New Grounds in Non-Financial Risk Management

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Abstract

Non-financial risks (NFR) have become as important as traditional financial risks (especially credit risk, market risk, and liquidity risk). The authors present a taxonomy for structuring NFR. Using this taxonomy, the authors develop impact graphs using graph databases in order to analyze events and scenarios that bear non-financial risks.

Keywords

  • NFR
  • Taxonomy
  • Graphs
  • Impact graphs
  • Risk category individual models
  • Big data
  • ML
  • DL

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Notes

  1. 1.

    Volatility‚ uncertainty‚ complexity, and ambiguity.

  2. 2.

    Financial risks could be further divided into credit risk, market risk, and liquidity risk.

  3. 3.

    The graph was generated with the graph database Neo4j (see Neo4j, Inc 2020).

  4. 4.

    In short: Siegfried, crown prince of Xanten, killed a dragon and bathed in its blood. This made him invulnerable except for a single spot on his back. There, a leaf from a linden tree had fallen on Siegfried’s back giving him his well-known vulnerability.

  5. 5.

    In this case, the benchmark is based on external peer groups but can be extended to internal structures like departments, business units, or legal entities.

  6. 6.

    Data lake: The term data lake is commonly used to describe a single data store that holds large amounts of raw data as well as processed data of an organization. It may include both structured and unstructured data objects.

Literature

  • Anonymous. beginning of 13th century. The Song of the Nibelungs.

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  • Neo4j, Inc. 2020. Home. September 15. Accessed January 10, 2021. https://neo4j.com/.

  • Schmüser, Arne, Farah Skaf, and Harro Dittmar. 2021. “Use Case—NFR—HR Risk.” In The Digital Journey of Banking and Insurance, Volume II - Digitalization and Machine Learning, edited by Volker Liermann and Claus Stegmann. New York: Palgrave Macmillan.

    Google Scholar 

  • Schröder, Daniel and Marian Tieben. 2021. “Sentiment Analysis for Reputational Risk Management.” In The Digital Journey of Banking and Insurance, Volume II—Digitalization and Machine Learning, edited by Volker Liermann and Claus Stegmann. New York: Palgrave Macmillan.

    Google Scholar 

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Correspondence to Volker Liermann .

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Liermann, V., Viets, N., Radermacher, D. (2021). Breaking New Grounds in Non-Financial Risk Management. In: Liermann, V., Stegmann, C. (eds) The Digital Journey of Banking and Insurance, Volume I. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-78814-8_10

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  • DOI: https://doi.org/10.1007/978-3-030-78814-8_10

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-78813-1

  • Online ISBN: 978-3-030-78814-8

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