A healthy appetite
Every one of us has our own personal appetite for risk. Some people think nothing of taking huge risks, both in their business and personal lives, whilst others are far more reserved, to the point of being almost totally risk averse. Most of us fall somewhere in between.
Similarly, all organisations have a ‘corporate’ risk appetite, which dictates the types and levels of risk that the organisation, or at least the senior management team that directs it, are willing to take or to accept. The problem is that it can be very difficult to pin them down and get them to define the corporate risk appetite, partly because it’s actually quite difficult to put into words. So few organisations bother to do so, and fewer still actually document and publish a formal statement of risk appetite to their managers and staff, which can make life a bit difficult for them in terms of their risk management efforts.
Whatever approach is taken, getting a steer from those at the top can be hugely beneficial. It helps get their buy-in, ensures a consistent approach, makes the risk assessment process more productive and can potentially save a significant amount of wasted time and effort by preventing managers and staff from barking up the proverbial wrong tree.
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