Mastering Risk Management

BENEFITS OF GETTING RISK MANAGEMENT RIGHT

Benefits of getting risk appetite right

It is easy to say that a certain level of risk is inherent in any business. ­Nevertheless, it is true. Risk appetite statements recognise that there is a trade-off between the amount of risk to which a firm wishes to be subject and the returns and costs involved in that level of risk. This involves recognition that financial risks and non-financial risks are fundamentally different. It is common (although misguided) to hear a board say that it has no appetite whatsoever for risk. Not only does the board have different levels of appetite for business as usual risk and unexpected losses, but other stakeholders have sometimes drastically different levels of appetite ...