Steps to Successful Risk Taking: Developing an Effective Risk Appetite and Risk Tolerance Statement

Published: Thursday, 14 April 2016 08:15

A formal risk appetite and risk tolerance statement can become a powerful strategic tool for not only managing risk but also for maintaining an effective balance between risk and reward: ¬†according to RIMS’ newly released Executive Report ‘Steps to Successful Risk Taking: Developing an Effective Risk Appetite and Risk Tolerance Statement.’

A follow up to a RIMS 2012 report, the 2016 Steps to Successful Risk Taking report defines commonly used terms; characteristics of a well-defined corporate risk appetite statement; and strategies for connecting statements to strategy. The report also provides examples of risk appetite statements developed by organizations from various industries, as well as the process for developing such statements implemented by a manufacturer, a non-profit and an insurance carrier.

“In addition to providing stakeholders with a better understanding of how the organization will approach uncertainties, the risk appetite development process also promotes productive conversations that positively contribute to the organization’s future,” said report author and Chair of RIMS Enterprise Risk Management Committee Frank Fiorille. “Aligning these statements with strategy has sparked a shift from organizations focusing on the impact of risk to informed risk takers.”

The report is available in the RIMS Risk Knowledge library. It is free for both RIMS members and non-members.