Are you thinking about risk capacity the same way I am?  Please read on and let me know.

In my world your capacity to bear and manage risk, risk capacity, is the basis on which you form your appetite for risk (appetite for doing business of certain types in certain places in certain ways).  I think of risk capacity in three dimensions:

Capabilities – The organisation’s capability to manage the business and to manage the uncertainties surrounding it.

Financials – The organisation’s understanding of its financial position and how different levels of financial impacts will affect the capability of the organisation.

Contingencies – Our ability to limit the impact of unwanted events and recover our capabilities (business continuity and crisis plans) and to recover our financial position (insurance and capital raisings as examples).

Have you been thinking about risk capacity in a similar way?  I would appreciate your thoughts.

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