Board Oversight of Management’s Risk Appetite and Tolerance: Regulators Claim They Expect It but Change Will Not Come Easy
EDPACS, 2015, Vol. 51, Issue 4, pp. 9-14.
Posted: 3 Feb 2018
Date Written: April 16, 2015
In the aftermath of the 2008 global financial crisis postmortems were convened in countries around the world to identify what went wrong. A unanimous conclusion was that boards of directors of public companies in general, and financial institutions in particular, need to do more to oversee "management's risk appetite and tolerance" if future crisis are to be avoided. This finding represents a significant paradigm shift in role expectations while introducing a new concept the Financial Stability Board has coined effective "Risk Appetite Frameworks (RAFs). Regulators around the world are now moving at varying speeds to implement these conclusions by enacting new laws and regulations. What regulators appear to be seriously underestimating is the amount of change necessary to make this laudable goal a reality.
Keywords: Board of Directors, Board Risk Oversight, Risk Appetitite, Risk Tolerance, Global Financial Crisis
JEL Classification: G20, G28, K19, K22, M14
Suggested Citation: Suggested Citation