QUANTITATIVE AND QUALITATIVE APPETITES
A firm has two types of appetites: quantitative and qualitative. A firm’s quantitative appetite is that which most people consider naturally. For example, a firm may have changed one of its business objectives to increase its sales by 30% in the next year and therefore is likely to be running a higher risk of mis-selling. The quantitative appetite for mis-selling may be expressed as the number of times per 1000 sales that there is an occurrence of mis-selling.
Given that the sales staff will be under significant pressure to bring in more sales, the firm should recognise that its quantitative appetite for mis-selling is likely to need to be increased as there will inevitably be more occurrences of this risk. ...
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