Risk Appetite
What is Risk Appetite?
The amount and type of risk an organisation is willing to accept in pursuit of its objectives. Set by the board and communicated throughout the organisation.
Terms that appear alongside risk appetite
Each of these is named in at least one of the same controls as risk appetite. The number is how many controls name both.
- governance 32 shared controls
- risk appetite statement 22 shared controls
- information security 19 shared controls
- compliance 18 shared controls
- audit 17 shared controls
- risk management framework 14 shared controls
- risk governance 11 shared controls
- risk tolerance 10 shared controls
Frameworks that govern risk appetite
What the standards actually require on risk appetite
Requirements naming risk appetite across 6 standards, quoted from the control text.
Liquidity risk appetites are clearly defined: set at syndicate level and linked to key risk sources and business objectives; time horizons considered; appetites embedded in other activities such as reinsurance and investment;
principles-for-doing-business-at-lloyd-s::P9.3 · 9.3 Clearly defined liquidity risk appetites →The framework should require initial communication and ongoing reinforcement of the risk appetite statement throughout the bank so that all employees align risk-taking decisions with it (monitoring and reporting in G.3 to G.5 more often as the size and volatil...
occ-heightened-standards-12-cfr-part-30-appendix-d::II.G.2 · II.G.2 Communicating and reinforcing the risk appetite →The institution must maintain an appropriate, clear and concise risk appetite statement addressing its material risks, with the Board responsible for setting risk appetite and required to approve the statement.
CPS220-06 · Risk Appetite Statement →The ERM framework must reflect the relationship between the insurer's risk appetite, its risk limits, regulatory capital requirements, economic capital, and the processes and methods used to monitor risk.
iais-insurance-core-principles-icps::16.3 · 16.3 ERM links risk appetite, risk limits, regulatory capital, economic capital and risk monitoring →Risk appetite is defined with reference to how the entity creates, preserves and realizes value. There is no universal or right appetite;
coso-enterprise-risk-management-erm-framework-2017::P7 · Principle 7: Defines Risk Appetite →The RSE licensee must maintain an up to date risk appetite statement covering its business operations and each category of material risk, approved by the Board.
SPS220-19 · Risk Appetite Statement →Questions people ask about risk appetite
What is Risk Appetite?
Why is Risk Appetite important for compliance?
Which compliance frameworks address Risk Appetite?
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See how Risk Appetite applies across compliance frameworks
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