Enable business leaders to apply risk appetite to their daily decision making
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Four Steps to Operationalize Risk Appetite
Organizations frequently face challenges in embedding risk appetite statements and tolerance levels into business operations. As a result, risk appetite remains abstract and challenging to implement. Without translating high-level risk appetite statements into actionable guidance, various units, functions, and risk owners are left uncertain about applying risk appetite in their routine decision-making processes.
Download this report to unlock 4 action steps to operationalize risk appetite:
- Determine risk tolerance and embed it into actionable guidance
- Assess knowledge gaps and communicate risk appetite to stakeholders
- Reinforce risk appetite through training workshops
- Establish a tolerance-focused risk-reporting process and track risk escalations
About Operationalizing Risk Appetite
The primary barrier to risk appetite effectiveness, according to heads of ERM, is the difficulty of articulating guidance that is actionable by the business. This barrier exists because ERM lacks feedback from the intended end users of risk appetite — business decision makers — during the framework’s design and implementation. Heads of ERM should prioritize gathering feedback from business stakeholders while establishing buy-in for risk appetite and centering the framework on the business’s top risks to increase the relevance of its guidance.
Furthermore, ERM must provide customized communication to risk appetite’s stakeholders, determined by their intended interaction with the framework, and train stakeholders to reinforce the guidance it offers. Heads of enterprise risk management can use this research to enable business leaders to apply risk appetite to their daily decision making.
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