Risk Culture Appetite Tolerance Topic 5 SMQR 5103

Risk Culture, Appetite & Tolerance Topic 5 SMQR 5103

Risk Appetite The amount & type of risk that an organization willing to pursue or retain. Total impact of risk an organization is prepared to accept in pursuing of its strategic objectives.

Risk Appetite Develop Monitor & update Communicate

Appetite Scale

Relationship between risk appetite & impact to business objectives Scenario Risk Appetite Impact to Business Objective Employee turnover High Low (greater buffer to strategize plan) Fluctuation of interest rate Low High (slight fluctuate will impact the organization tremendously

Appetite Statement Banking sector appetite statement Zero Appetite statement

Monitor & Review Risk Appetite Constant monitoring • KPI Detection of • Report to BOD for Variation / review discrepancies Review & change of risk • Update risk profile

Risk Tolerance Readiness to bear the risk after risk treatment in order to achieve its objectives. It is a measure of an organization’s capacity to handle risk

Risk Appetite & Risk Tolerance No. Risk Appetite Risk Tolerance 1 A kindergarten can accommodate 100 children The principle can accept 10% more than the per term. However, they can accept 10% more limit set provided they are of the ages 5 and than the capacity, which is an additional of 10 above. children. 2 The Shah Alam Hospital sets a client charter For non-life threatening cases, the patients where every patient will be treated within 1 hours may not receive attention within 3 hours. upon registration at the emergency department. For critically ill patients, they will be treated within 15 minutes. 3 BCTBU Sdn. Bhd, manufacturer of bio composite The manufacturer will not accept defect rate wood flooring slab has accepted a higher risk up to 50% above the limit set (1. 5 scratch appetite relating to product defects where they mark per 1000 feet of slab) can only accept one defect of one scratch mark per 1000 extruded slabs.

Risk Based Thinking & Decision Making

Risk Culture A collective belief & behavior towards certain aspect of the organization. Describe the values, beliefs, knowledge & understanding about risk shared within an organization

Building Risk Culture

Why need good Risk Culture?