Risk Appetite at the RMA Annual Conference
John Kelly 270004J7VQ email@example.com | | Tags:  grc enterprise operational risk | 0 Comments | 2,693 Visits
This week I had the pleasure (aside from the Sunday morning flight) of attending the RMA Annual Risk Management Conference in Washington, DC. Based on the standing room only crowd (even in the second repeat session), I’d have to say one of the most popular topics was “Developing a Risk Appetite” delivered by Bill Perotti of Frost Bank and Bob Rose of Brookline Bank. The duo defined Risk Appetite as “the amount of risk you will take in pursuit of a desired financial return”, which makes sense, but an effective risk appetite exercise, the presenters emphasized, really needs to be taken to the next level to reflect risk tolerance in all key areas of enterprise risk management (operational risk, credit risk, reputation risk, compliance risk, liquidity risk, sustainability, etc.).
Several examples were provided for how to develop a risk appetite statement for each of these key areas. One example included Operational risk and provided an example of how to create a risk appetite statement:
Operational Risk Appetite example:
We are committed to implementing practices and controls that will minimize financial losses from failures of systems, people and processes.
Quantitative measure examples:
Most importantly, risk appetite statements should reflect your company’s mission statement and values. Benefits outlined in the session included:
Of course the direction and communication on risk appetite needs to start at the top with the board of directors and CEO and be communicated and demonstrated throughout the organization. Looking forward to more informative sessions.