12 January 2016
How can you translate the concept of risk appetite into an understandable and workable policy?
We provide clear policy guidelines that include the level of risk per risk category, relative to the strategy, and we specify the risk appetite per category and subcategory. The risk appetite is expressed in a low, medium or high tolerance band. First, an explanation for the tolerance band is given, in which it’s made clear which risk consequences are acceptable. Let’s not forget that the manifestation of risk usually entails financial- and non-financial losses. By setting norms we establish limits to define when a risk is acceptable and when it’s not.
After starting with the risk categories and definitions that are relevant for you, we indicate the tolerance per category, namely: low, medium and high. We then interview stakeholders to throw some light on what’s been chosen, thus obtaining a frame of reference for the tolerance.