An entity’s risk appetite has a stronger affinity to that entity’s corporate culture rather than a particular business segment.  Risk appetite is not exclusively a BCM term, but extends to how the entity conducts any of its activities such as leveraging capital, changing core business processes, or venturing into new lines of business.

From: Bill Lang <wrlang@...>
Subject: Re: [discussbusinesscontinuity] Risk appetite
To: discussbusinesscontinuity@yahoogroups.com
Date: Tuesday, June 16, 2009, 9:45 AM

Agreed it is a common term, but not really defined by DRII or DRJ because it is subjective and changes based on the business environment, the changing times, and even the makeup of the decision makers. 

 

For example, the risk appetite for giving credit to poor credit risks has dropped tremendously.

 

Legislation and frequency of natural disasters can change the insurance industry's appetite for insuring risky areas or people.

 

A simple indicator of baseline risk appetite might be determined through the type of business.

 

For example, an insurance company may generally have a higher risk appetite than a manufacturer.

 

Assuming the risk we're talking about is impact to the business as a whole.

 

So a manufacturer might be generally designated as risk appetite 1 or low while an insurance company might be generally designated as risk appetite 2 or medium.   A small company that consists of one team specializing in putting out oil well fires might be designated as 3 or high for risk appetite.

 

Interesting.

 

 

Thanks or the thread.

Bill Lang.

 

 

 

 

 

----- Original Message -----

From: Andy Osborne

To: discussbusinesscont inuity@yahoogrou ps.com

Sent: Tuesday, June 16, 2009 7:11 AM

Subject: [discussbusinesscon tinuity] Risk appetite

“Risk appetite” is a commonly used term and the idea that everyone (whether individuals or groups of people such as management teams or boards of directors) potentially has a different risk appetite is, I think, widely understood.

However, I haven’t come across many people/organisation s who have defined their corporate risk appetite and articulated it in meaningful terms, and fewer still who have published a formal definition or policy so that the business understands the “rules” under which their business decision making should take place.

Does anyone have any thoughts on this topic or any examples (either real life or conceptual) that they can share?

Regards,

Andy

Andy Osborne MBCI

Consultancy Director

Author of "Practical Business Continuity Management" (ISBN 978-1-906316- 01-3)

Acumen Business Services Ltd
PO Box 92 , Evesham, Worcs WR11 7FN

Websites : www.acumen-bcp. co.uk and www.practicalbcm. co.uk

Phone : 01386 834455          E-mail : aosborne@acumen- bcp.co.uk 

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