[OR] [P1] [S4] Confirming Risk Appetite

Confirming Risk Appetite

For an organisation to achieve an acceptable level of operational resilience, management must identify, develop, measure, and confirm the organisation's risk appetite.

This blog will discuss how management can carry out these activities and outline the steps to confirm the risk appetite for operational resilience.

Identifying the Organisation's Overall Risk Appetite

The first step in developing the risk appetite for operational resilience is to identify the organisation's overall risk appetite.

This involves considering the organisation's strategic goals, values, and culture, as well as stakeholders' expectations, such as investors, customers, and regulators.

Management should also consider the potential impact of disruptive events on the organisation's reputation, financial performance, and ability to meet its obligations.

Developing Risk Appetite for Operational Resilience

Once the overall risk appetite is identified, management can develop the risk appetite for operational resilience.

This involves defining the organisation's tolerance for disruption and setting targets for recovery time objectives (RTOs) and recovery point objectives (RPOs).

Management should also consider the organisation's critical business services and prioritise the resources and investments needed to maintain operational resilience.

Measuring Risk Appetite

To measure the risk appetite for operational resilience, management should establish key performance indicators (KPIs) and metrics to track the organisation's performance against the risk appetite.

KPIs should be aligned with the organisation's strategic goals and easily measurable and understandable.

Management should also consider the frequency and intensity of scenario testing and simulation exercises to validate the organisation's ability to meet the risk appetite.

Confirming Risk Appetite

The final step in confirming the risk appetite for operational resilience is to conduct periodic reviews and updates.

This involves monitoring changes in the organisation's strategic goals, the external environment, and stakeholder expectations.

Management should also consider the results of testing and simulation exercises and adjust the risk appetite as needed to reflect the organisation's evolving needs.

Steps for Confirming Risk Appetite

• Define the risk appetite for operational resilience, considering the organisation's strategic goals, values, culture, and stakeholders' expectations.
• Set targets for RTOs and RPOs, prioritise resources and investments, and establish KPIs and metrics to measure performance.
• Conduct periodic testing and simulation exercises to validate the organisation's ability to meet the risk appetite.
• Monitor changes in the organisation's strategic goals, the external environment, and stakeholder expectations and adjust the risk appetite as needed.

Confirming the risk appetite for operational resilience is an ongoing process that requires management to continuously monitor and adjust it to reflect the organisation's evolving needs.

By following the steps outlined in this report, organisations can develop a risk appetite that aligns with their strategic goals and helps to ensure their ability to withstand, adapt to, and recover from disruptive events.

"Plan" Phase of the OR Planning Methodology