My last two blogs were about risk appetite and they got me thinking about a conversation I had back in 2001. I was in a corporate role and I was deciding between setting myself up as a consultant or taking a different path in corporate. Being a risk guy at the time I applied for a job as a weather derivatives trader because the ad listed risk analytics as a key skill.
My interview was with a manager out from the US. I remember he explained to me the company was very big on risk analysis and that they ran their organisation right on the edge of investment grade when it came to how the credit rating agencies like Moody and AM Best saw their stock and debt instruments.
He practically boasted about how they took big calculated risks, right around that edge.
That company was Enron. One of the biggest corporate disasters of the 2000s. It turned out that some of their risks came back to bite them and they entered into a series of fake holdings and kept a few other mishaps off the books. Eventually they could hide it no longer and they went belly up. Catching many, many people by surprise.
As I have said before. Choosing a risk appetite is one thing. Choosing an appropriate one that is followed by all staff is a different proposition.
You can read more on my thoughts on Risk Appetite here and download my paper, “Risk Appetite: Embed it deeply into your DNA” from there. If you are interested in having a conversation on how to bring value to an organisation through a risk appetite statement, please come join me and a group of other risk professionals at my group mentoring program that starts on Friday, 15th March 2019 in-person and streamed online.