Page 486 - COSO Guidance

14 | Risk Appetite — Critical to Success

DEVELOPING RISK APPETITE TO SUPPORT STRATEGY
AND OBJECTIVES

How can an organization bring out the implicit feelings that Sample questions for discussion may include the following:
the board and management may have about what they
believe is the organization’s appetite and how discussion 1 Can you describe activities that would, in your view,

of those views leads to development of appetite? be above our appetite and how might these relate to
our strategy?
Management and boards often use one or more
approaches to develop their appetite. These include 2 Can you describe activities that would, in your view,

facilitated discussions related to mission and vision, indicate the organization isn’t taking enough risk to
discussions related to strategies and objectives, and attain the performance it wants?
analysis of performance.
3 Are there aspects of our business that have a lower or

higher appetite for risk? Why?
We suggest organizations develop
an approach that includes facilitated 4 Which strategies or objectives are most important to

discussions related to mission our success? Do you view appetite differently for those
and vision, discussions related to strategies or objectives?
strategies and objectives, analysis of
performance, or other approaches 5 Where do you think our risk appetite is today? Is it
preferred by the organization.
averse, neutral, or aggressive? Do you think it should be
higher or lower in the future to sustain success?

Facilitated discussions 6 Are there specific risks that need to be considered in

Facilitated discussions can be very effective for a variety developing our appetite? Which ones and why?
of organizations. These sessions are most often led by the
person tasked with supporting the overall use of appetite, After several iterations, management can develop appetite
often at a senior level. statements that reflect the combined views of the board and
management.

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