Risk Appetite Frameworks: Insights into Evolving Global Practices

In the aftermath of the financial crisis of 2008, and in response to standard-setting guidance from the Financial Stability Board and other regulators, financial institutions have renewed efforts to strengthen the risk appetite framework (“RAF”) within their organizations. Both supervisors and financial institutions agree that the RAF is an essential component of an effective risk governance process. The International Association of Credit Portfolio Managers (“IACPM”) and PricewaterhouseCoopers LLP (“PwC”) jointly performed a study to understand industry practices and challenges of developing, implementing, and enhancing RAFs. The IACPM/PwC study surveyed 78 financial institutions across the globe, making this the largest published study of RAF practices.