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Risk Appetite & Assurance
Do you know your limits?
UK, other European Supervisory bodies and the global regulatory community are building an emerging consensus in what constitutes an effective risk appetite framework.
The Financial Stability board has released a consultation paper on the subject: 'Principles of an Effective Risk Appetite Framework' and understanding whether the organisation has a fit for purpose framework that accords with these principles is firmly on board agendas.
Internal Audit should assist the Board by providing independent assurance over the design and effectiveness of the risk appetite framework. This will involve an assessment of both its alignment with supervisory expectations (design) and extent to which it has been embedded in the business (operating effectiveness).