Page 496 - COSO Guidance

24 | Risk Appetite — Critical to Success

SUPPORTING THE USE OF APPETITE

Throughout this paper we have referred to “boards” and Exactly who does this must be decided by the board and
“senior management.” They both play a pivotal role in senior management. In some instances, the choice is clear
endorsing the importance of appetite, and creating the (e.g., a chief risk officer, if there is one in the organization). In
practices and culture needed to bring appetite to life within other instances, the board and senior management will need
an organization. to identify an individual with the appropriate capabilities,
capacity, and internal credibility to take on this role. What
We have stressed the board’s role in developing appetite and we have seen is that in the absence of having someone
in considering whether appetite aligns with its expectations. accountable, efforts to develop appetite are seldom
We have noted the importance of management in developing sustained in practice.
appetite from the top and cascading it throughout the
organization. Yet, the responsibility does not end there. We suggest organizations identify
As noted, appetite cannot be set once and then left alone. a responsible person to support the
Someone at a senior level in the organization needs to development and use of risk appetite.
take up the task of supporting its use. This includes helping
those in front-line roles incorporate appetite into day-to-day
practices and develop needed indicators. Management may
wish to develop an easy-to-refer-to set of guiding principles
for day-to-day management to use. Appendix B provides a
summary of key tasks in a generic infographic that can be
tailored by the organization.

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