4/14/16 - A Vexing Board Challenge: Evaluating Risk Appetite
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4/14/16 - A Vexing Board Challenge: Evaluating Risk Appetite

Risk appetite is an increasingly important concept in risk management discussions, but remains conspicuously absent from corporate-finance textbooks. Coming up with a process to determine the right amount of risk is a tall order, and the task is especially complex for financial institutions because they must account for so many disparate types of risk — some difficult even to quantify. And board directors at financial institutions are often asked to approve risk appetite statements that lack an overarching organization or logic.

But there are ways to think about this problem that can clarify how to define risk appetites. Please click “Read More” below to read a Sightlines InFocus by Richard Laiderman and Alan Weindorf that proposes a four-quadrant framework to organize and compare risks and help directors engage management in the kinds of discussions risk appetite statements are meant to provoke.

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