Risk Appetite Tolerance Capacity Flashcards
What is Risk Appetite
TRIGGER POINT ABOVE WHICH WE SHOULD RESPOND
The acceptable level for the risk, where no further action is required other than monitoring and reviewing for changes in the context, risk and controls
What is Risk Tolerance
the level of risk that you can accept for a short period of time, and which you will be actively managing to bring to an acceptable level
What is Risk Capacity
The amount of risk an org can take on without jeopardising their objectives.
This is the tipping point that the organisation cannot or does not wish to go over
What is Risk Exposure
Measure of potential future loss resulting from a specific activity or event.
Need to look at risks in totality rather than individually to understand the risk exposure.
Where should RA be identified
Within the context of the orgs overall business STRATEGY, TACTICS, OPERATIONS and COMPLIANCE with legislation and regulation (STOC)
Bit like looking at SR DB and making a decision whether to take more or less risk in some areas by looking across all STOC.
What’s an opportunity analysis
When an org decides to embark on a merger or acquisition that will affect its risk appetite. They should undertake an opportunity analysis of all acquisition opportunities. So basically, review the acquisition financially, look at risks to taking on.. etc. Is it worth it.
Explain captive or in house insurance
So basically companies would look at all the potential risks and insurance costs, costs of claims not insured and money spent on loss control actions within the company. Then used this to compare their performance against other company’s and set up their own insurance company against future losses.
Cons of a captive insurance plan - increased risk.
With a captive, the owner-insureds put their own capital at risk. If a company experiences a high number of claims, that capital could be lost. This is why it’s important to have robust risk management policies.
