“In the corporate world this will result in more sustainable, long-term value creation and in the public sector or not-for-profit world, it will result in better social outcomes," IRM Deputy Chairman Richard Anderson, the main author of the report, explained.

"Risk appetite today is a core consideration in any enterprise risk management approach for organisations of all types, yet there is little widespread understanding about what it means and how it can be applied. In the light of the explicit requirement in the UK Corporate Governance Code for boards to understand the nature and the extent of the risks that they face, IRM decided to take the lead on drawing together some practical guidance on the subject, aimed at board members as well as risk professionals,” he continued.

The IRM’s recommended approach to risk appetite, based on the experience of its members and following an extensive consultation exercise earlier this year, is designed to be both intellectually rigorous as well as highly practical.

“We think we have managed to outline a process which should be proportionate to an organisation's risk management maturity, capability and culture and, most importantly, supported by appropriate data. Nevertheless, we do not think that this is the last word on the subject in such a fast-moving environment and we are extremely interested in receiving feedback on this work," said Mr Anderson.

The IRM paper Risk Appetite and Tolerance is available to download for free at http://www.theirm.org/publications/risk_appetite.html

Commercial Risk Europe will be taking an in-depth look at the paper in its September issue.

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