Operational risk appetite and how to detect when your organisation is close to breach its pre-defined levels

By Manoj Kulwal, Eureka Financial Faculty

An organisation may have several business units and the activities of each unit may be unique e.g. a bank may have a retail banking and commercial banking business units. Each business unit will be exposed to a set of risks that may influence its ability to achieve its objectives. It may also be exposed to some risks that may also influence the ability of other business units or the overall organisation to achieve their objectives.

The type and level of risk exposures for a business unit may continuously change due to various factors such as decisions undertaken, organizational factors, changes in the external environment and crisis/incidents. The senior executives responsible for the business unit’s performance need to continuously review whether the risk exposures are within the pre-defined risk appetite. Other stakeholders such as operational risk group, internal auditors, risk committees and board members would also be typically interested in periodic assurance on the alignment of risk exposures of various business units with their pre-defined risk appetite.

What approaches do you use in your organisation to detect whether a business unit is close to breaching its operational risk appetite or when this has already been breached?

I have documented some common approaches here to get the discussion started.

If you want to learn about effective operational risk management strategies and best practices attend a 2 day workshop conducted by Manoj Kulwal, organised by Eureka Financial on 23-24 of June 2016 in London.


Eureka Financial is a market leader in banking and finance and corporate education. We offer over 100 public and in-company training courses in risk management and regulatory, corporate governance, banking and asset management, corporate finance and M&A, compliance, risk management,  investments, wealth management, soft skills and more. For more details visit: www.eurekafinancial.com


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