Advanced ERM Session 4: Risk appetite and Risk team structure

This presentation is based on a part of an academic course on Advanced Enterprise Risk Management (Advanced ERM) titled ‘Risk appetite and Risk team structure’ and covers topics such as: risk appetite: what is it and how can it be identified, risk team structure, what do risk teams do, creating a risk team structure, a case study based on Hydro One and material on risk reporting

1Session 4: Risk appetite and Risk team structure
2Session 4: Risk appetite and Risk team structure
3Risk appetite
4KPMG views on risk appetite (1)
5KPMG views on risk appetite (2)
6KPMG views on risk appetite (3)
7What does this mean in practice?
8Generating a risk appetite statement
9PWC Approach to risk appetite (Barfield, 2009)
10PWC Risk appetite elements (Barfield, 2009)
11IRM (2011) Guidance Paper (1)
12IRM (2011) Guidance Paper (2)
13Risk appetite and risk-reward trade-offs
14Academics often link risk appetite with capital
15Is capital always the right answer?
16Risk appetite also linked to portfolio optimisation
17Financial Stability Board (2013) (1)
18Financial Stability Board (2013) (2)
19Session 4: Risk appetite and Risk team structure
20What do risk teams do? (1)
21What do risk teams do? (2)
22What do risk teams do? (3)
23Session 4: Risk appetite and Risk team structure
24Creating an ERM function / Centralised Risk Team
25According to IAA note, newly appointed CRO may
26Existing context: questions to address include
27Organisational structures
28Risk function likely to require range of skills
29Example risk structure for a major bank
30Principal responsibilities of a CRO
31Policy and strategy
32Risk identification and assessment
33Management and reporting framework
34Reporting and stakeholder engagement
35Line support and knowledge sharing
36Is just having a dedicated risk team enough?
37Session 4: Risk appetite and Risk team structure
38Case study
39Hydro One
40ERM in Hydro One
41Initial attempts to establish ERM
42Risk management process
43ERM introduction and governance
46Overall aim
48Risk tolerances
49Risk tolerances (1)
50Risk tolerances (2)
51Risk magnitudes and probabilities
52Probability rating scale
53Risk maps (1)
54Risk maps (2)
55Risk owners
56Possible reactions to risk
57Corporate risk profile
58Investment / activity planning
59Perceived benefits / outcomes
60Class discussion
61Session 4: Risk appetite and Risk team structure
62Risk reporting, as per IAA Note
63Risk reporting: key questions to address
64Information associated with different risk categories
65E.g. Osterreiche Nationalbank (2004)
66Published Financial Statements
67Example dashboard reporting (1)
68Example dashboard reporting (2)
69Risk dashboards suggested by IBM (2009)
70Class discussion
71Session 4: Agenda covered
72Important Information

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