Risk e-Views Vol 46 October 2014 – Risk Leadership: Operationalising Risk Appetite – Some of it lies within the data

Last month I mentioned a recent webinar I ran on Risk Appetite in which I pointed out that an articulated risk appetite statement is only the beginning. You need managers to operationalise it so that staff can live it. 

One part of operationalising risk appetite is through communication to staff. Another part is through implementing a regime of risk tolerance monitoring. In plain language that means: monitoring processes and systems to see if they are operating as they were designed to.  

There are several challenges when it comes to establishing a monitoring regime:

1.    You measure way too many things.

2.    You look at something and suggest it is simply not measurable.

3.    You don’t see the value in measuring so you don’t even start.

In truth:

A.    You should only be measuring what matters.

B.    Everything is measurable, it is a case of making sure we know which measures matter and then devising a means to economically measure them.

C.    The value comes from understanding what the data is telling you and being able to communicate that to the business.

All of these answers lie within the data, data you have access to right now, however, you don’t even realise it.

What is required is the development of the skills or the acquisition of resources that can help you find the answers from within the data and to create the narrative around it so you can communicate it to the business.

Please don’t throw your hands up and say it is too hard. Take on the challenge. Boards and Executive teams are demanding earlier and earlier indicators of risk, not more excuses as to why we did not see it coming.