Risk Appetite:
Risk appetite is the amount and type of risk that an organization is willing to take in order to meet its objectives. It reflects the organization’s risk tolerance and guides decision-making at all levels.
Impact of Market Changes:
A change in the market situation can alter the risk landscape, potentially affecting the organization’s ability to achieve its objectives. This might necessitate a reassessment of what level of risk is acceptable.
Senior management needs to ensure that the risk appetite remains aligned with the new market conditions and organizational goals.
Reevaluation Process:
Reevaluating the risk appetite involves assessing the organization's capacity to bear risk and determining if the current acceptable risk levels are still appropriate.
This might involve more conservative or aggressive risk-taking strategies based on the new market dynamics.
Other Considerations:
Risk Classification:This categorizes risks but does not directly address changes in acceptable risk levels.
Risk Policy:While important, the policy outlines the approach to managing risk and is influenced by the risk appetite.
Risk Strategy:This defines how risks are managed but should be aligned with the risk appetite.
References:
The CRISC Review Manual emphasizes the importance of aligning risk appetite with the organization’s strategic objectives and market conditions (CRISC Review Manual, Chapter 1: Governance, Section 1.10 Risk Appetite, Tolerance, and Capacity) .
