Implementing Risk Appetite Frameworks: Navigating Challenges in Corporate Environments
DOI:
https://doi.org/10.63062/trt/V24.024Keywords:
Risk Management, Risk Appetite Framework, Risk CultureAbstract
The subject of the "Risk Appetite Framework" (RAF) is vast, and a cursory search yields an abundance of research articles covering its various aspects. However, there is a noticeable gap in the literature specifically addressing real-world challenges faced by Risk Managers in the effective implementation and enforcement of RAF. While general research offers valuable insights, it falls short in detailing practical obstacles. This paper aims to consolidate findings in a strictly professional environment, highlighting the hurdles risk managers often encounter, rendering an impaired risk management framework with limitations. The limiting factors in this regard may encompass lagged implementation of risk management framework following the finalization of strategic financial planning, risk culture, nebulous key risk indicators, and a holistic interpretation of risks that could stand the test of time. Despite these challenges, the implementation of RAF remains a highly productive activity, providing substantial benefits even when the framework adopted is not fully comprehensive. The purpose of this research is to better equip Risk Managers for the challenges they may face in drafting and executing an effective RAF. The paper categorizes these challenges into three key areas: preparation and implementation, enforcement, and reporting.
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