Exploring Risk Tolerance and Risk Appetite

75 Pages·2014·10.12 MB·English

Exploring
Risk Tolerance and
Risk Appetite
“Appetite is how big
Tuesday, 2nd September
are your eyes,
tolerance is how big
is your stomach.”
Recording of this session via any media type is strictly prohibited.
Our speakers
Carol Fox
Director of Strategic and Enterprise Risk Practice
RIMS, the Risk Management Society™
[email protected] | www.rims.org
Prior to joining RIMS in 2010, Carol held a number of progressively responsible risk management positions in
the customer care, communications, manufacturing, defense, and insurance industries. A Miami University
graduate, she serves on its Center for Business Excellence advisory board and is vice chair of the U.S. Technical
Advisory Group for ISO 31000 standards. In 2009, she received RIMS’ prestigious Harry & Dorothy Goodell
Award. In 2011, Treasury & Risk acknowledged her as one of its 100 Most Influential People in Finance.
John Kirwan
Risk Manager
Museum of Old and New Art
[email protected] | mona.net.au
John comes from an Occupational Health and Safety background with over 30 years of experience in design and
coordination of a systems-based approach to contolling risk. John has an extensive background in high risk
sectors such as Forestry, Construction and Aquaculture. Developing a systems- based approach to control the
various risks in these sectors has provided a range of knowledge that has been applied in other industry sectors
such as engineering, medical diagnostics and manufacturing. His current position within MONA requires an
innovative approach and his background enables the unique range of risks that characterise the experience at
MONA to be effectively controlled.
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What to Expect
• What Do We Mean by Risk Tolerance
and Risk Appetite?
• Different Strokes
• Risk Tolerance and Appetite at the
Museum of Old and New Art
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is a shared, learned, symbolic
system of values, beliefs and
attitudes that shapes and
influences perception and behavior
-- an abstract "mental blueprint" or
"mental code."

Source: http://www2.eou.edu/~kdahl/cultdef.html

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Risk Attitude or Philosophy
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Stakeholder Influence on Organizational Risk Appetite
Understanding the varying risk attitudes of the
organization’s external and internal stakeholders
may influence how the organization balances its
risk appetite statements with the expectations of
these stakeholders.
Source: RIMS Executive Report: Exploring Risk Appetite and Risk Tolerance 2012
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What We Have Here is a Failure to Communicate
WHAT DO WE MEAN BY RISK
TOLERANCE AND RISK APPETITE?
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Understanding Your Organization’s Risk Appetite
Defining Acceptable Boundaries

Developing Risk Portfolio Views

Calculating and Articulating Risk Tolerances

Attacking Gaps Between Perceived and Actual Risks

Making Risk and Reward Trade-Offs in Daily Management


RIMS Risk Maturity Model

Factors within the Risk Appetite Attribute
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What is acceptable?
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Integration with Strategy Planning Process
Assessment Articulation Action
What risks
can I take?
How much risk
can I take?
Risk Control
RISK
Strategic Capital Risk Identification
APPETITE Plan Allocation Results
Risk Assessment
Who is willing Risk Balancing
to take the
risks?
Risk Limits
When do we Strategic risks Risks arising
take the
risk?
from the
strategic plan
Source: Constellation Energy Presentation at RIMS 2012 Annual Conference by Brenda Boultwood, Former CRO
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