APPETITE AND RISK TOLERANCE
John Galarani
Compliance Officer specializing in Corporate Investigations and Governance Corporate, Risk and Compliance ( GRC)
?A rationale for managing appetite and: Develop and Review, Communicate and Monitor Risk Appetite
?Definition of COSO - A value of risk (loss in the sense of earning less than expected or loss and actual loss in certain events), broadly speaking, that an entity accepts in achieving its objectives. It reflects the management philosophy and therefore influences the culture and style of operations.
?The COSO - Enterprise risk management - Integrated framework establishes 5 principles related to risk appetite: and a guide in establishing strategies; guides the allocation of resources; aligns the organization, people, processes and infrastructure needed to effectively respond to and monitor risks; reflects the entity's risk management philosophy and influences the culture and style of operational management; should be considered in establishing strategies so that they align with risk appetite.
?THE ROLE OF THE BOARD OF DIRECTORS (BOD)
?The Board of Directors must always consider the Risk Appetite when approving the Board's actions, mainly the strategic plan, the budgets, the "business cases" - for expansion and investments, risk x return, etc. in new products, services and/or markets
?RISK APPETITE AND RISK TOLERANCE
?They are related. Risk appetites and strategic and broad. Risk tolerance and tactical and operational.
Tolerance and what we can, that is, what is within our limits
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?Appetite can be risky, with a meaning of "losses". In this case, with limits that can be guided by risk tolerance (losses), including "stop loss".
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Appetite and tolerance for opportunities at first sight might be thought infinite. Because the more we earn, the better! But no they must also have their limits, as they can blur, disorganize, bring serious inefficiencies and inefficiencies and lead to the collapse of the company and even the total imbalance of a world economic system. A balance between actions should never be overlooked. Therefore, appetite for opportunity intrinsically brings appetite to the risks of these opportunities.
?John Galarani
?Rio de janeiro/Brazil
?#riskmanagement #opportunity #business #management #infrastructure
?#opportunities #people #events #investments #culture #markets
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Expert in Credit Risk, Business Transformation, Internal Audit, AI audits, Governance, and IFRS Implementation | CFE, CIA, CA and PG in derivatives and risk
4 周Wells said JOHN GALARANI add below to simplify
Compliance Officer specializing in Corporate Investigations and Governance Corporate, Risk and Compliance ( GRC)
1 个月Every organization must accept that taking risks to innovate and grow is inherent to business. To not do so leaves?the organization vulnerable to losing ground to other competitive organizations. The challenge is to know the right amount of risk necessary to sustain innovation and growth across the organization. With that knowledge, an organization can determine which strategies to adopt and which objectives to pursue.? Risk appetite must also be flexible enough to adapt to changing conditions, helping an organization to remain relevant in the evolving landscape. For example, during good economic times, a successful and growing company may be more willing to accept certain downside risk than when economic times are bad and business outlooks deteriorate. Early applications of risk appetite often focused on financial and operational measures. This focus worked well with?a compliance mindset. but to exce in applying appetite, organizations need to broaden their scope, which requires viewing enterprise risk management through the lens of objectives that align with performance expectations. This view expands risk appetite to include all stakeholders, and to being incorporated into the organizational culture.?