Enhancing the links between risk appetites and risk processes embedded in the business

Liezl De Villiers Getz
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Liezl De Villiers Getz: Head of Operational Risk Identification, Aviva Investors, UK

Journal of Securities Operations & Custody, 2018, vol. 10, issue 3, 241-253

Abstract: Risk management is consistently evolving and revolutionising the manner in which we manage and grow businesses. A few years ago ‘risk appetite’ was merely a theoretical concept. Now this concept manifests itself as the nervous systems of companies whereby risk appetites are developed for the major risk groups using sound practice guidance; documented in risk appetite statements (RAS). The recent Klynveld Peat Marwick Goerdeler (KPMG) ‘Risk and ICAAP benchmarking survey1 in 2017 tell us that there are disconnects between risk appetites and risk taking activities. Resolving this disconnect is a powerful empowerment tool enabling faster and more efficient strategic growth in a responsible manner. PricewaterhouseCoopers (PWC) also issued a survey2 in 2017, ‘Managing risks from the front line’, stating that empowering employees in a risk aware manner enables a more engaged first line rigorously balancing decisions between risk and strategy. This ultimately results in better net profits and stakeholder (including customer) experience. Companies who have integrated risk appetites with risk taking activities thereby moving risk management into first line reported better performance than those who have not. The methods described in this paper enhance the links between risk appetites and risk taking activities, promoting healthy growth aligned to the above survey results. It transforms a firm from being reactive to becoming strategic and proactive.

Keywords: Risk appetite; resolving disconnects; empowerment; risk aware; stakeholder engagement; performance (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2018
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