WHAT ARE NON-FINANCIAL RISKS?

Any issue that could cause reputational harm to a business is a non-financial risk. Non-financial risks cover a far wider scope than purely financial ones; some are entirely different, such as health and safety and child labour, while others, such as anti-money laundering, corporate governance and product disclosure, overlap.

Non-financial risks are more open to issues and actions within a supply chain. These can often appear to be disconnected from the consumer facing business by being a number of ‘steps’ upstream and therefore can be perceived to be beyond a business’s sphere of influence.

Consequently, non-financial risks can often lead to businesses, who believe they are not directly connected to an issue, being targeted by governments and non-governmental organisations to help resolve issues by exerting their leverage on the affected area of the supply chain.

Equally, non-governmental organisations now often target upstream operations as a proxy to exert leverage on errant governments. As a result, downstream operations that do not understand the ramifications of their supply chains suddenly find themselves in the midst of negative campaigning.