Table Of Content

Risk appetite John Thirlwell Non-executive Director, Chase Cooper Limited SII, London, 11 October 2007 • Defining risk appetite (cid:129) Measuring risk appetite (cid:129) Approaches to appetite setting (cid:129) Expressing risk appetite in risk policies Definition The amount that a firm is willing to risk (for a given risk-reward ratio) What do we mean by risk? What do we mean by risk in the context of operational risk? Is operational risk different from other risks? (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:18) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78) (cid:53)(cid:76)(cid:86)(cid:78) (cid:44)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:16)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:34) (cid:38)(cid:68)(cid:81)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:72)(cid:17)(cid:74)(cid:17)(cid:87)(cid:75)(cid:72) (cid:51)(cid:9)(cid:47)(cid:3)(cid:82)(cid:85)(cid:3)(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:47)(cid:72)(cid:71)(cid:74)(cid:72)(cid:85)(cid:34) (cid:38)(cid:68)(cid:81)(cid:3)(cid:92)(cid:82)(cid:88)(cid:3)(cid:75)(cid:82)(cid:79)(cid:71)(cid:3)(cid:68)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:15)(cid:3) (cid:76)(cid:17)(cid:72)(cid:17)(cid:3)(cid:70)(cid:68)(cid:81)(cid:3)(cid:92)(cid:82)(cid:88)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:3)(cid:82)(cid:88)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:72)(cid:79)(cid:79)(cid:3)(cid:76)(cid:87)(cid:34) (cid:44)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:34) (cid:38)(cid:68)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:85)(cid:3)(cid:69)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:71)(cid:34) (cid:129) Defining risk appetite (cid:129) Measuring risk appetite (cid:129) Approaches to appetite setting (cid:129) Expressing risk appetite in risk policies Measuring operational risk – some issues (cid:129) The operational risk definition: people, process, systems, external events. (cid:129) Cause (cid:198) Event (cid:198) Effect (cid:129) The operational risk management framework: – Losses – Risk and Control (Self-)Assessment – (Key)(Risk/Control/Performance)Indicators – Scenarios Frequency and severity – traditional view of assessing op risk 3 6 9 High (3) Frequency 2 4 6 Med (2) 1 2 3 Low (1) Low (1) Med (2) High (3) Severity Frequency and severity - modern operational risk management High (3) n/a n/a Frequency Med (2) n/a Low (1) Low (1) Med (2) High (3) Severity Appetite for loss (cid:129) Losses – sole or aggregate? (cid:129) Banding losses for risk assessment – and appetite e.g. Expected loss (annual and therefore budgeted) Unexpected loss (e.g. 5% [1:20] confidence level) Catastrophic loss (e.g. 99.5% [1:200] confidence level) or more . . . RCA in monetary terms

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The amount that a firm is willing to risk (for a given risk-reward ratio). What do we mean by risk? What do we mean by risk in the context of operational risk?

Risk appetite - John Thirlwell PDF

25 Pages·2008·0.34 MB·English

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The amount that a firm is willing to risk (for a given risk-reward ratio). What do we mean by risk? What do we mean by risk in the context of operational risk?

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