The concept of "risk" is often a difficult one for businesses to grasp. While taking on too much risk can be detrimental to an organisation's overall goals, leading to an "all or nothing" situation that backfires more often than not, too little risk can prevent a business from moving forward with its objectives. This is why having an appropriate risk appetite is crucial for any business, regardless of its size or the industry that it is in. Understanding how much risk appetite is the right amount for your business can be a challenge, which is why so many people turn to risk appetite consultants such as Risk Management Partners to assess how much risk is the right amount.
Having the right risk appetite is central to the enterprise risk management process, and enables businesses to not only set out objectives but also to understand what must be done to achieve them. Risk Management Partners can help enable businesses to understand the optimal risk appetite envelope within which it should operate to achieve its goals. Too little risk taking and the objective probably won’t be met, too much risk taking and not only may it not be met, damage may be done to other aspects of the business.
Embedding Risk Appetite in Your Organisation's DNA
Embedding risk into your organisation's DNA is an important step in improving your resilience and learning how to progress to meet and even exceed the objectives that your organisation has set.
Among the most important aspects of making risk appetite a part of a business's DNA is ensuring that it is consistent across the entire organisation. One of the ways that risk appetite consultants such as Risk Management Partners can help businesses is by ensuring that all the decision makers are briefed on the concepts surrounding risk appetite and that they know what an acceptable amount of risk is when it comes to making strategic decisions for their organisation.
As part of establishing risk appetite through a risk appetite statement signed off by the Board, consultants such as Bryan Whitefield also help organisations establish the right risk tolerances to monitor the organisation’s risk capacity. That is, its capacity to manage risk within the envelope defined by the risk appetite statement. By taking these factors into account, consultants can help organisations identify the areas in which they could potentially take on more risk and where they may need to build risk capacity before taking on more risk.
Developing a Risk Appetite Statement as part of a Risk Management Program
A risk appetite system allows decision makers in organisations to manage risk at all levels by ensuring that the decision makers are aware of what is an appropriate amount of risk for them to take on. This kind of strategic risk taking can improve a business's ability to meet and exceed their objectives. Part of developing a risk appetite system is the creation of a risk appetite statement that allows all individuals within an organisation to better understand what an appropriate amount of risk is, and how they can incorporate risk into their decision making. Risk appetite consultants can help in the development of this statement, and likewise help ensure that it is implemented at all levels within an organisation. For more information about risk appetite or to receive consulting services, contact Risk Management Partners to learn more.