Expressing risk appetite Matrix-based expression Probability and impact boundaries - the risk matrix Targets, limits and thresholds – Targets – e.g. grow market share by 5% – Limit – maximum or minimum value to accept, e.g. unexpected loss amounts – Threshold – RAG reporting: green-amber threshold and an amber-red threshold Expressing risk appetite – an example An organisation has a target for growing its asset base by £10 million per year. Prefer growth rate to vary by no more than 10% (£1 million) per year When asset growth < £9 million or > £11 million per year, this is ‘amber’ (A) risk 

Why can both increase and decrease be amber risk source/events? Absolute limit or appetite: asset growth < or > 50% (£5 million) When asset growth < £5 million or > £5 million, then this is ‘red’ risk (R) What therefore is the level of ‘G’?

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In the given example the organization has a target for growing its asset base by 10 million per year ... View the full answer