Business is run by making decisions.
That’s a fact.
Success depends on good decisions (or luck). Hasty decisions based on incomplete or unreliable information usually lead to poor results (even with luck).
Those are facts.
When you make decisions, whether in business or in your personal life, is a risk appetite statement relevant?
Do you have a risk appetite statement in your personal life?
If you don’t have or need one in your personal life, why do you need one in your business life?
Someone commented on LinkedIn that because people have different risk appetites you need a corporate risk appetite statement. I can sort of see that. People in different positions have a different attitude towards taking risks. For example, I would hope the CFO and General Counsel are more risk averse than the head of Sales.
But does a corporate risk appetite amount or statement drive your decision-making?
Let’s take a relatively simple business decision. (The only simple ones are where the correct decision is obvious. Even then, the obvious choice may be the wrong one when all the information is obtained and studied.)
The company is considering raising the price of its flagship product. After all, it has been two years since it changed the price, and annual inflation is now above 4%.
We…
