NACD Advisory Council on Risk Oversight: Board-Management Dialogue on Risk Appetite

In brief: The NACD Advisory Council on Risk Oversight met in February 2017 to discuss the board’s role in the development and oversight of risk appetite. The discussion—cohosted by NACD, PwC, and Sidley Austin LLP—highlighted a number of takeaways for directors:

1. Align the risk appetite statement with company strategy.
2. Use the risk appetite statement to inform critical processes and decisions.
3. Continually reevaluate the risk appetite statement.

This resource can help your board to

• determine which metrics to use in the risk appetite statement.
• establish performance targets in incentive plans that promote high performance and limit unhealthy risk-taking.
• shape company culture by defining tolerance levels for risk.
• improve communication across the company and boost reporting to the board.

Most relevant audiences: risk committee members, chief risk officers, compensation committee members, and audit committee members