Risk management strategy
First, let's understand what a strategy is. A strategy is a plan that helps us achieve the objective. In this sense, a risk management strategy is a plan for achieving the risk management objective. The ultimate objective of any risk management program is to support the business objective by mitigating the risk to an acceptable level. Thus, the main objective of the risk management strategy is to support the business objective.
The risk management strategy should be aligned with the overall governance strategy. It should be consistent and integrated with the overall governance strategy.
Risk capacity, appetite, and tolerance
The first step of learning about risk management is understanding the following three important terms:
- Risk capacity
- Risk tolerance
- Risk appetite
Let's understand the difference between risk capacity, risk appetite, and risk tolerance, as follows:
- Risk capacity: This is the maximum...
