Risk Appetite

Risk appetite can be interpreted as reflecting the setting of targets and limits across the organisation as a whole, plus the breakdown of these high-level statements into more detailed risk tolerances. [Source: Institute and Faculty of Actuaries (IFoA) Enterprise Risk Management Specialist Principles (SP9) Core Reading]

It is the level of aggregate risk that a company can undertake and successfully manage over an extended period of time (Tavan). The capacity for undertaking risk will vary by company and depend on circumstances unique to the company. To determine its capacity, a company will need to initially establish a set of corporate objectives, e.g., minimum surplus ratio, industry rating. Ultimately, a company will need to develop corresponding risk-management strategies to successfully manage its risks. [Source: Society of Actuaries (SOA) Enterprise Risk Management Specialty Guide]

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Enterprise Risk Management (ERM)

Enterprise risk management (ERM) is the discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risk from all sources for the purposes of increasing the organization’s short and long term value to its stakeholders. [Source: Casualty Actuarial Society (CAS) Overview of Enterprise Risk Management]

It is a process, affected by an entity’s board of directors, management and other personnel, applied in a strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity goals. [Source: Society of Actuaries (SOA) Enterprise Risk Management Specialty Guide]

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Strategic Risk

Strategic Risk relates to the achievement of an organisation's overall strategic business plans and objectives. [Source: Institute and Faculty of Actuaries (IFoA) Enterprise Risk Management Specialist Principles (SP9) Core Reading]

Strategic Risks are risks from damage to reputation, competition, demographic trends, technological innovation, capital availability and regulatory trends. [Source: Society of Actuaries (SOA) Enterprise Risk Management Specialty Guide]

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