Why CFOs Must Take Ownership of Behavioural Risk Reporting

Hypothesis: CFOs Are the New Stewards of Behavioural Risk Data

In the modern regulatory environment, CFOs are increasingly tasked with ensuring the accuracy and accountability of non-financial data, including behavioural risks. Historically managed by HR, these risks have often been treated as matters of workplace culture or employee satisfaction rather than integral components of organisational performance. While HR's focus on these issues has been valuable, the lack of alignment with financial and operational metrics has left gaps in addressing them with the rigour required for risk management frameworks, regulatory compliance, and strategic oversight.

New frameworks, such as the EU Corporate Sustainability Reporting Directive (CSRD), mandate comprehensive non-financial reporting on sustainability and governance risks, including behavioural risks. This shift is not just about regulatory compliance, it is a business imperative.

Why Behavioural Risks Matter to Financial Performance

1.????? Compromised Innovation and Change Management Investments: Behavioural risks such as toxic work environments and a lack of psychological safety can stifle innovation by discouraging employees from sharing ideas or taking calculated risks. Additionally, these risks undermine organisational initiatives to implement change, wasting investments in transformation programs and eroding employee buy-in.

2. Productivity Losses: Behavioural risks can create a hostile work environment that undermines teamwork, disrupts workflows, diminishes morale, increases mistakes and rework, and degrades customer service. These factors collectively result in significant operational inefficiencies and a direct decline in organisational output.

3. Increased Staff Turnover and Recruitment Costs: A toxic work environment drives employees away, inflating hiring and onboarding expenses, whilst loosing invaluable knowledge and weakening talent competencies.

4. Legal and Regulatory Penalties: Misconduct can result in costly lawsuits, fines, and reputational damage.

Accurate reporting of behavioural risks is critical for managing financial performance and investor confidence. These non-financial metrics are no longer peripheral concerns; they are foundational to sustainable business operations and value generation for stakeholders.

The Problem with HR-Led Behavioural Risk Survey Data

Inconsistent and Subjective Results: Surveys are underpinned by shallow logic, which prevents them from addressing the intricate blend of non-linear and linear logic or managing the interrelationships necessary for accurately identifying behavioural patterns. This includes behavioural risk patterns, such as the links between precise bullying conditions within, for example, the categories of verbal abuse and authority abuse, or the interrelationship between specific bullying risks and code of conduct risks.

The lack of robust logic makes it impossible for surveys to adapt to the nuanced and complex scenarios often present in workplace environments. As a consequence, the data generated from surveys is inadequate to meet the increasing rigours of non-financial reporting, where precision, traceability, and comprehensiveness are paramount.

For example, in organisations attempting to meet EU Corporate Sustainability Reporting Directive (CSRD) standards, survey data fails to provide the traceable evidence required by internal and external audits, leaving gaps that undermine both compliance efforts and stakeholder confidence.

To make matters worse, surveys are not suitable for automated classification of risks because they lack the advanced logic necessary to identify and categorise risks in a consistent and scalable manner. This further limits their ability to produce behavioural key risks indicators for benchmarking with meaningful insights. As a result, survey data fails to produce the structured, actionable insights needed for robust behavioural risk management strategies.

From Intangibles to Tangibles: A Paradigm Shift

The paradigm shift is for CFOs to take ownership of non-financial data related to behavioural risks, reflecting their growing role as stewards of organisational integrity and compliance. Historically, behavioural risks have been managed almost exclusively by HR, but their approach fails to meet the precision and measurements required in today’s regulatory environment.

Under this new paradigm, HR retains its critical role in resolving behavioural risks by implementing interventions and fostering a positive workplace culture. Meanwhile, the CFO is responsible for ensuring that behavioural risk data is captured, structured, and aligned with regulatory reporting requirements and organisational risk frameworks. This includes integrating behavioural risk metrics into financial reporting structures to provide a cohesive view of organisational health. Additionally, the CFO is better positioned to assign and quantify the financial impact of unacceptable behavioural risks, such as increased turnover, regulatory fines, or reputational damage, ensuring that these risks are managed with the same financial discipline as other organisational challenges.

By elevating behavioural risk data to the same level of scrutiny as financial metrics, CFOs ensure that organisations can meet the rigorous demands of frameworks like the EU CSRD. This shift enables stakeholders to access actionable, credible insights into behavioural risks, enhancing both transparency and trust. Importantly, it empowers HR to focus on proactive risk resolution while the CFO ensures the data’s reliability and regulatory compliance.

This realignment transforms behavioural risks from intangible concerns into tangible metrics, driving organisational change and safeguarding long-term value creation.

Conclusion

The emergence of new forms of AI and advanced technologies makes this paradigm shift particularly timely. These innovations provide organisations with unprecedented capabilities to capture, analyse, and manage behavioural risk data with precision and reliability. By embracing this change, CFOs can not only meet today’s regulatory demands but also future-proof their organisations against the evolving complexities of governance and risk management, while also driving better socioeconomic performance and organisational resilience.