Do you have a defined risk capacity? What about a clear risk profile? Or a risk appetite statement?
"Carelessness and overconfidence are more dangerous than deliberately accepted risk” - Wilbur Wright, 1901
Risk Appetite Frameworks are an emerging discipline in an organization’s governance programme that enable you to support conscious and profitable risk-taking as well as avoid catastrophic failures. The frameworks comprise policies, processes, skills and systems such that risk appetite is the way the business, its people and functions communicate, think and manage risk.
Fundamentals
Risk Capacity A defined Risk Capacity that identifies the maximum level of risk at which the organisation can operate, within implied constraints of strategic, financial and operating parameters and its obligations to stakeholders.
Risk Profile A clear Risk Profile of the organisations entire risk landscape reflecting the nature and scale of its risk exposures aggregated within and across each risk category.
Risk Appetite A defined Risk Appetite Framework stipulating the risk the organisations is willing to take in pursuit of its business strategies.
Risk Appetite Statement A written Risk Appetite Statement clearly articulating the approach to the entire organisation.
Risk Appetite Limit A defined Risk Appetite Limit detailing the level of risk which, if breached would necessitate immediate escalation and corrective action.
Risk Appetite Triggers Risk Appetite Triggers defining the level at which escalation occurs to a higher level of authority because the risk profile is sufficiently close to the risk appetite limit that corrective action should be considered.