Mastering Risk Management

RISK APPETITE STATEMENT

The risk appetite statement is about the practical implementation of the risk appetite. It is a clear written form of the types of risks that a firm is willing to accept, or to avoid, in order to achieve its business objectives at both group level and business line level. It will include qualitative statements as well as quantitative measures and these may be expressed relative to earnings, capital, liquidity or other risk measures. The risk appetite statement (see Figure 4.3) addresses both easy-to-quantify risks and more-difficult-to-quantify risks such as reputation and conduct risk as well as money laundering and unethical practices.

Figure 4.3 Risk appetite statement

The statement is intended to make appetites ...