RISK APPETITE

 

What defines a robust risk appetite? Firstly, it aligns closely with the business strategy. It incorporates both qualitative statements and quantitative metrics, along with exposure limits. Additionally, it adjusts to evolving circumstances, changes in business objectives, variations in skills, and resource availability. The more clearly defined your risk appetite and tolerances are, the more effectively you can optimize risk-reward outcomes and strategically leverage risks. 

                           Challenges in Real Workplace

Risk Appetite and Supply Chain

                                      Challenge 

Aligning Risk Appetite with Evolving Global Supply Chains

Example: An enterprise manufacturing smartphones sources components globally. Its risk appetite allows moderate risks in procurement to reduce costs. However, geopolitical tensions in a supplier country escalate, threatening supply chain stability.

                                   Likelihood Analysis

Moderate to High, as geopolitical tensions are unpredictable but not uncommon.

                                              Impact

High, as supply chain disruptions could lead to production delays, increased costs, and potential market share loss.

                                 Frameworks to Consider

ISO 31000 (Risk Management) and Regulatory Compliance: Controls from regulatory requirements GDPR for data protection, SOX for financial reporting.

                                          Gap Analysis

Conduct a gap analysis to identify areas where your current controls might not fully address the identified risks.

Cross-Functional Integration.

We continuously monitor. Regularly review and update the control mappings to reflect changes in the business environment and emerging risks.👌