“Risk appetite is very much a cultural challenge. Defining a statement is the easy part – living it is more challenging” – Survey respondent
Banks are in various stages of defining, implementing and enforcing the risk framework.
For example, the role of the board in risk management has evolved from pure oversight to active participation in defining risk appetite, and approving the broad risk parameters for the organizations. The role of the CRO has increased to serving as a key driver of both the framework development and ongoing management of risk appetite throughout the organization.
Banks are also incorporating a variety of metrics into the risk appetite statement, such as capital position, liquidity position, credit quality and maximum earnings volatility.
While banks also reported that risk appetite is increasingly integrated with business and financial planning, all agree that the challenge is how to implement and enforce it, making it relevant to the business units on a day-to-day basis.
Board involvement in risk appetite
Risk appetite’s link to business decisions
Risk appetite review process
Challenges to risk appetite
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