Are you hungry for a better approach to risk appetite?

Recently, Chris Burt of Halex Consulting sent me a copy of a paper he had written, Feeling hungry? A simpler, more intelligent approach to risk appetite.

There’s a great deal to like in his approach:

• Your organisation is clear on its purpose and values, has a clearly-defined corporate strategy and has even set SMART strategic objectives for the executive. But how much risk should the organisation take in trying to achieve its objectives and deliver its strategy?
• Unfortunately, the generally accepted approach is to develop a board-level risk appetite statement. Such statements tend to be theoretical, static documents that jump through the hoops of addressing how much – or how little – of key types of risk the organisation is willing to accept or avoid.
• What about Board decision-making? Ideally, it should be informed by risk appetite. But how many boards consult their own risk appetite statement when considering major decisions, including changes to strategy? The answer is, unsurprisingly, very few. And the reason: board-level risk appetite statements tend to be difficult to understand and impractical to use in real-world decision-making situations.
• The key weakness…