Protiviti’s Early Mover Series explores various aspects of PRIM2 framework for integrating strategy-setting, performance management and risk management with the intent of helping companies become early movers in the marketplace. We define an "early mover" as a firm that quickly recognizes a unique opportunity or risk and uses that knowledge to evaluate its options before the opportunity or risk becomes widely known. This white paper, the third in the series, discusses the importance of risk appetite to the governance process. Specifically, it:
- Explains risk appetite and how it differs from risk tolerance.
- Introduces a framework for developing a risk appetite statement.
- Illustrates what a risk appetite statement looks like.
- Examines how risk appetite influences organizational behavior.
- Provides an overview of the process for defining and maintaining the risk appetite statement.
- Discusses how management and the board of directors should sustain a dialogue around risk appetite as circumstances change over time.