The regulator APRA stated that "Conduct Risk has entered the lexicon of bank Boards and regulators as a clear and present danger" noting that such non-financial risk, risk underpinned by human risk, is one of the greatest to banks, because they are "neither understood nor owned".

(APRA Prudential Inquiry into CBA, 2018)



Human Risk encompasses loss to an organisation caused by human factors including the decisions and non-decisions, actions and non-actions of its people. "Loss" includes both financial and non-financial loss such as loss of reputation, loss of relationships, loss of client trust and employee trust. Human Risk can also be caused by how an organisation manages its people and what it demands from them. 


Human factors are aspects of human function, thinking and states that affect performance. They are both physical and psychological, each impacting the other.

Examples of human factors include beliefs & values, stress / overload, biases, academic and emotional intelligence, motivation, memory and physical factors such as fatigue, hunger, age, health both mental and physical.

Some human factors are common to all of us and others are the result of our individual experiences over our lifetimes.  


In the workplace, human factors are influenced by the bank's culture and environment, organisational and job specific factors. 

Together, human factors and the conditions that influence them, determine important outputs such as decision making, behaviours, moral reasoning, overconfidence, groupthink, judgement, resilience, conflict, reactions, collaboration, communication, empathy and mental health & wellbeing. 


On the Individual 


On the Financial Institution  

Individual and workplace human factors can lead to a reduction of human risk as factors either combine to support the optimal function of employees, or an increase in human risk, when employees operate sub-optimally inside and outside the workplace. In these situations, the impact on an individual can include:


  • Increased stress resulting in a deterioration of highly valued advanced cognitive skills, the very skills the organisation has invested in  

  • Compromised decision making

  • Rationalisation of cognitive biases

  • Frustration/anger/conflict with employer or other employees

  • Compromised mental health

  • Poor self-management - bullying, harassment, substance misuse, family violence 

  • Ineffective or harmful communications

The GFC, the Royal Commission in addition to the growing legislation around Work Health & Safety have demonstrated the impact of human factors on the human risk within organisations including:

  • Loss of trust by internal and external stakeholders

  • Unethical decision-making

  • Systemic misconduct

  • Excessive groupthink 

  • Reputational damage 

  • Cultures of overconfidence, entitlement

  • Increased compensation claims, litigation, fines

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