Friday, 22 July 2011

IRM Solvency II SIG Presentations from July - Risk Appetite focused

The Institute for Risk Management's Solvency II Special Interest Group have published their July presentations, which were centred around the White Paper on Risk Appetite that they published back in April/May.

The survey on that white paper's content was quite telling - bearing in mind the sample is still relatively small (23 respondents), they were nicely split between agreement and ambivalence on;
  • Whether the white paper provided a "workable basis" for developing risk appetite and risk tolerance approaches
  • Whether there was sufficient guidance on the development of risk appetite in the doc
  • Whether there was sufficient guidance on board/risk committee oversight of risk appetite development
Seems to be general consensus on;
  • Organisations having "multiple risk appetites"
  • "Risk management maturity" being an appropriate concept to build appetite and tolerance from (large number of "partially agrees" however, which could mean anything!)
  • That more guidance is needed on the concept of "Risk mmanagement maturity"
  • That "propensity to take risk" and "propensity to exercise control" are appropriate concepts
  • That listed companies should consider shareholder value as an appropriate measure of risk appetite
  • That Risk Appetite should be measured
  • That there are (a range of ) critical elements missing from the paper (range of qualitative and quantitative suggestions provided)
  • That a short version would be appreciated for Board consumption
  • That the approach in the White Paper will be useful for Solvency II purposes
Two presentations have been published - one from Grant Thornton, which even in slide format looks like a decent stab at getting to the measurables of Risk Appetite, the other from Crowe Horwath which is a more meandering view with some nice touches (the idea of Capability versus Ability is very smart). They also cross-pollenate the Survey results with those of the ERM SIG, with some interesting divergences (namely that the ERM SIG are much more definitive in their responses, and rarely say "don't know"!)

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