Defining Risk Appetite - Integrating Corporate Performance Management and Risk Management

We define an "early mover" as a firm that quickly recognises a unique opportunity or risk and uses that knowledge to evaluate its options before the opportunity or risk becomes widely known. This white paper, the third in the series, discusses the importance of risk appetite to the governance process. Specifically it:

• Explains risk appetite and how it differs from risk tolerance;
• Introduces a framework for developing a risk appetite statement;
• Illustrates what a risk appetite statement looks like;
• Examines how risk appetite influences organisational behaviour;
• Provides an overview of the process for defining and maintaining the risk appetite statement;
• Discusses how management and the board of directors should sustain a dialogue around risk appetite as circumstances change over time.

Many see risk appetite as a highly theoretical concept that is difficult to apply in practice. Some even assert that risk appetite is irrelevant because it cannot be applied effectively in practice ... READ MORE

Released by Protiviti - January 2013