Risk Appetite - Hungry or Averse?!?

The whole area of risk assessment and risk management is increasingly important and under ever increasing scrutiny from regulators and investors alike. The Corporate Governance Code 201o re-inforces this emphasis, with requirements of the FSA for financial institutions taking it even further. Clarity about what is specifically required by regulators is however in short supply.

Looking at the response required by the FSA from his organisation, a CEO recently asked me about risk appetite represented numerically. In searching out an answer to this questions one of my researchers uncovered some interesting papers that may be of help to anyone looking at risk. I have inserted some graphical extracts below with the links to these papers should you want to read them in detail.

The KPMG paper gives a good oversight and the HM Treasury papers is excellent for detail.

"Understanding and articulating risk appetite" KPMG

http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/Risk-appetite-O-200806.pdf,

Adapted from above

"Risk appetite - How hungry are you?" PWC

www.pwc.com/en_GX/gx/banking-capital-markets/pdf/risk_appetite.pdf

"Thinking about risk. Managing your risk appetite: A practitioners guide" HM Treasury

http://www.hm-treasury.gov.uk/d/tar_practitioners_guide.pdf