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Chapter 2

Risk management strategy

3.1 Formulation of a risk strategy

 Risk appetite the amount of risk an organisation is willing to accept in
pursuit of value

 Risk capacity the amount of risk that the organisation can bear

 Risk attitude the overall approach to risk, in terms of the board being
risk averse or risk seeking

 Residual risk the risk that a business faces after its controls have
been considered

3.2 Features of a risk management strategy (CIMA and IFAC joint report)

 Statement of the organisation’s attitude to risk – the balance between risk and
the need to achieve objectives

 The risk appetite of the organisation

 The objectives of the risk management strategy

 Culture of the organisation in relation to risk

 Responsibilities of managers

 Reference should be made to the risk management systems the company uses
(i.e. its internal control systems)

 Performance criteria should be set so that the effectiveness of risk
management can be evaluated

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