Skip to main content
Poole College of Management
Enterprise Risk Management Initiative

Risk Appetite and Response

Oct 1, 2015

Value Creation through Risk Management

Many companies have come to realize that risk management serves more than just a compliance function. In the ever-changing risk environment we live in today, risk management also serves to add value to the company. After conducting their Global Governance, Risk and Compliance Survey, EY published a white paper with a three-step approach to risk management.

May 1, 2014

Understanding Risk Appetite

In order for directors to oversee risk management effectively, there must be a clear understanding of what constitutes the organization’s risk appetite. The concept of a risk appetite is fairly new and can be a bit confusing. A recent thought paper by PricewaterhouseCoopers (PwC) seeks to explain risk appetite in “plain English.” The thought paper defines risk appetite, describes how to develop a risk appetite statement, and explains the oversight role of the board in the development of the risk appetite process

Mar 1, 2013

Demystifying Risk Appetite

The enterprise risk management (ERM) community is certainly aware of the idea of “risk appetite;” however, despite the attention that risk appetite receives from ERM practitioners, it remains an elusive concept to apply at the enterprise level. In this article from the Spring 2012 issue of Corporate Risk Canada, author Rob Quail, long-time Director of ERM at Canadian utility Hydro One Inc., attempts to explain and cut through the confusion surrounding risk appetite. Quail also walks through a fresh methodology for defining and measuring risk appetite that can help organizations to make better, more consistent business decisions.

Aug 1, 2012

How Risk Aversion Can Hurt Your Organization

While we know we must take risks to generate returns, some programs fail to remind managers that ERM is as much about taking risks in pursuit of value as it is about risk avoidance or mitigation. Sometimes too much attention is focused on risk avoidance, which may cause some organizations to squander reasonable opportunities to grow and achieve enterprise objectives. A McKinsey & Company article explains how an overabundance of risk-averse management behavior can actually inhibit a firm from progressing at its full potential. The article outlines behavioral biases that create this risk-avoidance phenomenon among managers and offers guidelines that can help companies mitigate these behavioral biases, thus improving risk management and business performance.

Jun 1, 2012

Risk Appetite: A Conversation of Governance

Managers often view risk appetite as a highly theoretical concept: one that is determined instead of discussed, irrelevant instead of practical, or static instead of adaptive. This paradigm is due to the notion that risk appetite reflects a short term risk philosophy of the company, and the frequency of which risk appetite is viewed as being congruent with risk tolerance. The authors of this Protiviti white paper discuss the importance of developing and maintaining a risk appetite statement as well as using it to spur conversation between management and the board of directors in the governance process.

May 1, 2011

A Comprehensive Guide to Risk Appetite and Risk Tolerance

With the scarcity of useful guidance to help organizations determine risk appetite and risk tolerance, the Institute of Risk Management (IRM) is seeking to clarify and produce guidance to more effectively communicate an understanding of risk appetite. As a result, IRM released a consultation paper with detailed approaches for developing and using risk appetite and risk tolerance in risk management. In addition to the guidance provided, questions are listed throughout the document with the suggestion that they be asked in the boardroom to ensure that risk appetite and risk tolerance are being adequately addressed.

Jul 1, 2010

Balancing Risk Appetite and Strategy Execution

Good risk management involves making informed and rational decisions considering the risks the company wants to take in pursuit of its objectives and regarding the measures used to mitigate and manage risks. This publication explores how companies can effectively define risk appetite, risk tolerance, and risk targets to execute strategies and perform effective risk management to gain a competitive advantage.

Jun 28, 2010

Aligning Risk Appetite and Risk Exposure

The devastating effects of the global credit crisis can be linked to the failure of organizations to embed risk management within the foundation of strategic and operational processes. Now, increased pressures from all around call for an integrated and aligned approach to risk management. This white-paper explores how organizations can effectively align performance and risk management processes to not only reduce risk but also embrace opportunities.

May 1, 2009

Seven Question Guide to Assessing Your Enterprise Risk Management Practices

Risk professionals should consider seven questions in evaluating risk management tools, improving risk management practices, and assessing the state of ERM in an organization. Professionals should ask these seven questions: (1) if the risk management process really assesses risk; (2) if the risk assessment is context-driven; (3) if the risk management process address root causes of failure; (4) what business performance says about risk; (5) what the organization's risks say about its controls; (6) what the organization's controls say about its risks; and (7) if the professionals and their organizations are up for the task of risk management.

Dec 1, 2008

Understanding and Articulating Risk Appetite

Risk appetite, when properly understood and articulated, can be a powerful tool for managing risk and enhancing overall business performance by better aligning decision-making and risk. Many organizations have a need for increased clarity regarding their risk appetite and this article provides insights on formulating and defining risk appetites.