WEBINAR: Unravelling Risk Appetite and Tolerance
We have been using the term risk appetite for many years. It is used regularly in the media and all the major consultancy groups and many professional associations with an interest in risk management. We discuss the term and describe its interpretation and application. Now regulators are asking companies to prepare statements of their risk appetite as part of their governance processes.
The concept of risk appetite seems deceptively simple: it is often described as how much risk we might wish to ‘take’ to achieve a desired return. In practice, however, an organisation’s risk appetite can be exceedingly difficult to tie down or define. .
Efforts to quantify risk appetite can sometimes produce an illusion of precision while, in practice, the resulting statements are of little practical use and just add to the confusion. The equally rubbery phrase ‘risk tolerance’ is also often used at the same time as risk appetite. The two terms are often used interchangeably and sometimes appear to have overlapping definitions.
- How to use the concepts of risk appetite and tolerance in a practical, no-nonsense approach as part of decision making
- The challenges with the concepts and definitions
- How risk appetite can be defined for your organisation
- What ‘tolerance’ really means
- Key risk indicators – why these are not what they seem and how to define and use them