What constitutes "non-financial risk" in ORM?

The correct answer focuses on the aspects that fall under "non-financial risk" in the context of Operational Risk Management (ORM). Non-financial risks are those that do not have a direct monetary impact but can significantly influence an organization's performance and stakeholder trust.

Specifically, risks affecting organizational reputation and compliance are integral components of non-financial risk. These can include incidents of fraud, legal issues, and various forms of corporate misconduct that may lead to reputational damage or regulatory repercussions. Such risks can have far-reaching consequences for an organization, including loss of customer trust, diminished market value, and regulatory scrutiny, all of which can indirectly affect financial performance.

The other options pertain to risks that can be categorized differently within ORM. Risks tied directly to monetary losses are considered financial risks. Risks associated with investment portfolios often belong to market risk or financial risk categories. Finally, risks linked solely to employee performance generally fall under human capital risk, which, while associated with operational risk, does not encompass the broader aspects of reputation and compliance that non-financial risks represent.