PRACTICAL GUIDELINES TO FORMULATE AN OPERATIONAL RISK APPETITE STATEMENT FOR CORPORATE ORGANISATIONS: A SOUTH AFRICAN PERSPECTIVE

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Abstract

Risk appetite is currently a much debated topic and a new concept being researched and implemented by various large organisations. However, currently there seems to be much confusion on this topic in terms of an overall risk appetite statement. Uncertainty exists, for example, if there must be a statement for each primary risk type the organisation faces, or should there be an overall risk appetite statement for the organisation? This article approaches a risk appetite statement from an operational risk perspective, which could serve as a platform for other risk types. Therefore, the significance of this research aims to provide guidelines to corporate organisations during the setting of a realistic operational risk appetite statement that could add value during the pursuance of business objectives within the approved tolerance levels.

Keywords: Risk Appetite, Risk Tolerance, Operational Risk, Key Risk Indicators, Risk And Control Self-Assessments, Scenarios, Loss History, Risk Control, Risk Appetite Statement, Business Strategy, Risk Exposures, Qualitative Statement, Quantitative Statements, Zero Tolerance, Risk Thresholds, Economic Capital

How to cite this paper: Young, J. (2014). Practical guidelines to formulate an operational risk appetite statement for corporate organisations: A South African perspective. Corporate Ownership & Control, 12(1), 46-62. https://doi.org/10.22495/cocv12i1p3