Actuarial Notes

Practice Resource Document: Risk Appetite

By Committee on Enterprise Risk Management, Canadian Institute of Actuaries · Canadian Institute of Actuaries · 2021 · 221124

Study guide: Exam CFE-101

A practice resource document, dated November 2021, prepared by the Canadian Institute of Actuaries' Committee on Enterprise Risk Management to help actuaries, risk practitioners, risk managers, executives and board members understand risk appetite and incorporate a risk appetite framework into their enterprise risk management program. It addresses key concepts, principles and objectives of an effective risk appetite framework, and how to turn them into risk appetite statements, limits and ongoing alignment processes.

On the syllabus

  • Exam CFE-101 — CIA Practice Resource Document: Risk Appetite, Nov 2021; outcomes 1.1a, 1.2a, 1.2b, 1.2d, 2.2h, 3.1a, 3.1b, 3.3c.

1 Introduction

2 Description of key concepts

3 Principles and objectives of an effective risk appetite framework

4 Risk appetite statement

  • 4.1 Stakeholder considerations
  • 4.2 Risk type considerations
  • 4.3 Communication considerations
  • 4.4 Examples of risk appetite statements

5 Risk capacity and risk tolerance

  • 5.1 Risk capacity
  • 5.2 Risk tolerances
  • 5.3 Risk limits
  • 5.4 Examples of risk limits

6 Risk measures and reporting

  • 6.1 Risk measures
  • 6.2 Risk aggregation and dependencies
  • 6.3 Risk profile vs. risk limits
  • 6.4 Risk limit dashboard

7 Risk governance

  • 7.1 Roles and responsibilities
  • 7.2 Role of the actuary
  • 7.3 Ongoing alignment of risk appetite

8 Linking risk appetite to the business

  • 8.1 Communicating risk appetite
  • 8.2 Embedding risk appetite in business activities
  • 8.3 Allowing for future business growth and change
  • 8.4 Connecting risk appetite to risk culture
  • 8.5 Examples of links to business

9 Bibliography

Sources