Page 469 - COSO Guidance

Risk Appetite — Critical to Success | iii

MESSAGE TO BOARD MEMBERS, CHIEF EXECUTIVES,
AND SENIOR MANAGEMENT

Why should you spend time worrying about risk appetite? Often, approaches that react to what’s going on have
Many think that it is something that board members, chief somewhat limited appeal. Boards and management need to
executives, and senior management intuitively know, or become anticipatory—to listen to these voices and make
work out while making decisions. They may even think they decisions that are mindful of those views. Those who are
don’t need another document on the topic. We disagree. able to anticipate and understand their risk when change
We need to make risk appetite an integral part of happens are better able to embrace change and be more
decision-making. agile in challenging conditions.

This document focuses on developing strategies and We believe that risk appetite is a critical link between
objectives and managing your organization for success, forming strategy and realizing performance. Our goal,
given the amount of risk you are willing to, and need to, consequently, is to help boards, executives, and managers
take for success. What is important here is to recognize improve their strategy setting and performance by showing
that the choice of strategies and objectives requires an them how they can more effectively apply risk appetite.
understanding of appetite for risk.
We’re confident that your appetite for risk will change
This is becoming more difficult as business landscapes over time as your strategies evolve. We encourage you to
are changing, and we see further challenges ahead. exercise your governance responsibilities and explore how
There are more voices impacting organizations in new your executive team is applying appetite to successfully
ways. Regulators are broadening their reach into data create and protect the value of your enterprise and
privacy and security, stakeholders are expecting companies enhance relationships with your stakeholders.
to share strong social purpose, and employees are shifting
the way they work. The risks associated with the changing
landscape differ based on strategic directions, and these
messages must be understood.

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