The Committee on Enterprise Risk Management (ERMPC) has prepared this practice resource document to provide assistance to actuaries, risk practitioners, risk managers, executives, and board members who would like to gain a better understanding of risk appetite and incorporating a risk appetite framework into their enterprise risk management (ERM) program.
The document addresses key concepts, principles and objectives of an effective risk appetite framework. It provides assistance on how to translate these principles and objectives into meaningful risk appetite statements that can be easily understood across the organization, along with practical limits and on-going alignment processes to ensure its relevancy going forward.
An effective risk appetite framework can help organizations strike the right balance between uncontrolled risk taking and excessive caution, enhancing risk awareness and communication across an organization. Real life examples are included throughout this document.
This paper focuses on ERM from an actuarial perspective and is intended to assist practitioners in considering whether they have addressed all of the various potential topics of relevance.