The Institute of Management Accountants has published a new
The document provides board members, corporate executives, and the risk, compliance and audit professionals who support them, with a set of guidelines, best practices and practical examples for developing and implementing an effective risk appetite statement, or RAS, framework.
It includes a maturity model to help an organization assess its current state of RAS implementation, with benchmarks included for further development. Risk management consultant James Lam wrote the framework to help companies address fundamental questions regarding strategy, risk management and operations.
The IMA noted that establishing risk tolerance is one of the major challenges in developing an RAS framework, but it is essential to its success. The framework provides a tool for organizations to pursue their business strategy while managing their risks.
The document includes the various requirements of a risk appetite framework, including key concepts and definitions. It also provides advice on developing an RAS, including implementation steps and ongoing refinement, along with the roles and responsibilities of the board, senior management, and business and operating units.
The framework describes the necessary monitoring and reporting processes, including links between the RAS metrics at different levels of the organization, along with a practical example of an RAS with illustrative metrics and risk tolerance levels by key risks. An RAS maturity model provides benchmarks to support self-assessment and benchmarking.
