Risk appetite
Risk appetite is central to strategic risk management.
Without appetite, risk often isn’t optimised and ultimately plays more of a compliance role.
With appetite, companies can unlock value across our 3 core tenets: Protect, Anticipate, and Grow.
We know it’s hard to get right. We’ve been there and we’ve been through it.
That’s how we developed our approach, with 3 key stages that are easy to understand.
PAGER resource: Risk appetite – a new approach.
Your business
Do you need help with risk appetite? Here are some challenges we often hear:
- Our board’s appetite isn’t aligned with management, so we keep getting told “No” and being asked to provide more reports.
- Risk appetite is just risk jargon and words on page.
- The risk appetite statements live ‘in a drawer’ and are never looked at by the business.
- We have quite good risk appetite statements, but we struggle to bring the concept to life.
- Our appetite isn’t quantified at all and the business doesn’t know to apply it.
- Leadership isn’t supportive of risk appetite or refuses to use it.
- Appetite isn’t integrated into the rest of our enterprise risk management system.
Our approach
PAGER’s pragmatic approach has 3 key stages to get risk appetite working in your business.
In our first stage, we look at how you anchor risk appetite. We help companies to develop a custom risk taxonomy that aligns to their value chain. This enables you to meaningfully manage both known and unknow risks, and threats and opportunities.
In our second stage, we help companies to define their risk appetite so that it is instructive, balanced, simply communicated and supported by leadership. We do this using our ‘risk appetite scale’, which cover appetite levels, control and assurance activity, and trade-offs and choices.
Complementing this scale, we work with your SMEs to establish key risk indicators (KRIs) in the areas where the effort is warranted. With proven tools and templates, we know the immense value of KRIs to proactively manage risk appetite performance, but we also know the practical limitations and the extra effort required.
In our third stage, we bring risk appetite to life. This means providing reporting on our risk appetite performance and holding our leaders accountable; integrating risk appetite into decision-making, risk assessments, assurance planning and more; enhancing culture and capability, particularly among senior decision-makers; and helping plan for your technology to enable your ambitions.
Outcomes and outputs
- Custom risk taxonomy aligned to your value chain, operating model and organisational values, refined or defined from scratch
- Executive accountabilities for appetite clearly assigned and upheld
- Guided workshops with board, executive and others as needed to align on thresholds
- Practical communication of appetite thresholds using our ‘risk appetite scale’
- Proactive KRIs in place to monitor risk appetite performance (too much risk and not enough risk)
- A risk appetite implementation roadmap that covers practical embedding, culture change, technology adoption and more
- Risk appetite working and being used for decision making in your business.