Transcript

SPEAKER 1:

Risk appetite- so it sounds a little bit like it's about how much can you eat. And actually, that's a really good description of appetite. It's how much risk can you take on as a company.

SPEAKER 2:

So risk appetites is one of these terms that I know has recently appeared in lots of material and lots of literature. If you google it, for example, you'll find pages and pages and reams and reams of information, much of which is quite confusing. For me, risk appetite is all about saying how much risk am I prepared to take. What level of risk do I want to take, and what level of risk is too much?

And for most businesses, that's set against the level of reward that you're intending to receive. So I think a great analogy here would be that the financial markets where the more risk you're prepared to take, the more reward you can get. So risk appetite there is about saying how much risk am I prepared to take, how much money am I prepared to lose in seekingreturns.

SPEAKER 3:

If you're dealing with a supply chain for an organisation, for example, you could say that, OK, if we're not happy with risk appetite, we could do something like purchase additional stock so that if we had some form of crisis, we could draw on that, certainly, in the short term.

SPEAKER 4:

So we can have, say, safety compared to financial. So safety- in the rail industry, it's a safety industry. Safety is paramount. We don't want to take any unnecessary risk around safety, so we have a really low appetite for any safety risk.

Financially, again, no business can not have a low appetite for financial risk because you've got to take risks to move the business on. But there's also a limit. You've only got a finite capacity financially. So there's still limits, but you've got- you'll take more risk. You're prepared to lose some money in order to gain somewhere else.

So risk appetite is just about trying to explain to the organisation there's some areas we do not want you to take any risk, and there's other areas where we do want you to take some risk. There are boundaries within them. But ultimately, don't do anything that's going to be risky there. But within reason, fill your boots. We want you to do something over there. And ultimately, risk appetite is- that's all it's trying to do.