Risk Appetite & Tolerance

Risk Appetite & Tolerance

October 2019 saw the ASIC Corporate Governance Taskforce issue the ‘Director and officer oversight of non-financial risk report’.  Amongst other findings, the report highlighted that:

  • Risk appetite and the metrics for non-financial risk were immature compared to those for financial risk, with management operating outside of board-approved risk appetites for non-financial risk for months/years at a time;
  • Metrics designed to measure risk often failed to provide a representative sample to the Board of the level of risk exposure, and did not allow accurate benchmarking of the board’s stated appetite;
  • Board engagement with the ‘Risk Appetite Statements’ (RAS) was not always evident;
  • Material information about non-financial risk was often buried in extensive board packs – with boards not owning or controlling the information flows from management to the board to ensure material information was brought to their attention;
  • Management reporting often failed to clearly identify/prioritise non-financial risks.

The full report can be downloaded at: https://asic.gov.au/regulatory-resources/corporate-governance/corporate-governance-taskforce/.

Riskwest has a developed a process for developing succinct RAS and risk assessment/acceptance criteria to guide and support better decision-making.  There is the added ability to develop profiling metrics for use by board and executive.

Speak to your usual Riskwest contact or email enquiries@riskwest.com.au.