[Sustain] [OR-P3-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 organization's risk appetite. This blog will discuss how management can perform these activities and provide the steps for confirming the risk appetite for operational resilience.

Identifying  Organization's Overall Risk Appetite

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

This involves considering the organization's strategic goals, values, and culture and stakeholders' expectations, such as investors, customers, and regulators. Management should also consider the potential impact of disruptive events on the organization'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 organization's tolerance for disruption and setting targets for recovery time objectives (RTOs) and recovery point objectives (RPOs). Management should also consider the organization's critical business services and prioritize 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 organization's performance against the risk appetite.

KPIs should be aligned with the organization'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 organization's ability to meet the risk appetite.

Confirming Risk Appetite

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

This involves monitoring changes in the organization'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 organization's evolving needs.

Steps for Confirming Risk Appetite

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

In Conclusion ...

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

By following the steps outlined in this report, organizations 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.

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