Establishing well considered risk appetite guide s management in setting goals and making decisions, and also enables personnel to pursue objectives within acceptable limits
Determining how much risk to take is therefore, fundamental to a risk management success however we often observe that of all the risk management framework components many organisations struggle to understand what risk appetite is and, therefore, either don’t establish risk appetite statements/criteria and/or develop a risk appetite that is ineffective. Hence, they miss a great opportunity to focus risk management efforts in the right areas
Do you have an effective risk appetite statement? Does provide clear direction in how, where and when you allocate resources to manage risk?
Once risks are analysed for likelihood and consequence, they are evaluated using risk appetite to determine whether additional treatment of a risk is required, and if treatments are required, what are the priority treatments?
A statement of risk appetite can be simple or more detailed depending on the needs of the business and level of risk maturity. For example, a simplistic approach is to link treatment action (including timing and responsibilities) to pre-determined risk rating, or a more comprehensive approach is to develop specific risk appetite statements/criteria for each organizational objective)
Riskcom has worked closely with organisations, including facilitating workshops with Boards and executive teams, to establish effective risk appetite statements that are most appropriate and meaningful to their business. We have developed innovative methods of expressing risk appetite – taking what can potentially be a difficult concept for some organisations and presenting it in a format that is clear and concise and has the ownership of senior management and executive teams.