Risk pyramid with capacity appetite tolerance and target

Description:

The image shows a PowerPoint slide titled "Risk Pyramid with Capacity Appetite Tolerance and Target," which is a strategic tool used for risk management in business settings.

The pyramid visualizes the concept of risk management by dividing it into several layers, each representing a different aspect of risk:

1. Risk Capacity: At the top, the green layer represents the capital or resources available to the organization to absorb risk.

2. Risk Appetite: The next layer in light blue signifies the level of risk the organization is willing to take to achieve its strategic goals.

3. Risk Tolerance: The darker blue layer indicates the degrees of risk the organization is prepared to accept in various areas such as strategic, operations, compliance, and financial.

4. Risk Target: The base layer in navy blue represents the desired balance between risk and reward, correlating to the business plans and metrics.

5. Risk Limits: Off to the side, this indicates the maximum risk the organization is prepared to accept in various operational areas such as research & development, sales & marketing, procurement, manufacturing, distribution, customer support, administration, and finance.

Icons next to the pyramid suggest adjusting mechanisms: a gear for Risk Appetite, a dollar sign for Risk Capacity, a hand for Risk Tolerance, and a target for Risk Limits.

Each section of the pyramid has "strategic goals," "risk appetite correlated to risk category," and "risk tolerance correlated to business plans and metrics" written inside, which implies that these concepts should be aligned with the organization's overall risk strategy.

Use Cases:

The Risk Pyramid is a crucial framework for businesses to balance potential gains against potential risks. Here's how it's applied across various industries:

1. Banking:

Use: Aligning risk management with financial objectives.

Presenter: Chief Risk Officer.

Audience: Risk Management Team, Bank Executives.

2. Insurance:

Use: Establishing underwriting risk thresholds.

Presenter: Underwriting Manager.

Audience: Underwriters, Actuaries.

3. Healthcare:

Use: Managing patient care risks versus treatment outcomes.

Presenter: Medical Director.

Audience: Healthcare Providers, Hospital Administrators.

4. Construction:

Use: Balancing project risks with safety and cost controls.

Presenter: Safety Compliance Officer.

Audience: Project Managers, Construction Engineers.

5. Technology:

Use: Weighing innovation risks against market demands.

Presenter: Chief Technology Officer.

Audience: Product Development Team, Investors.

6. Energy:

Use: Assessing environmental risk versus energy production goals.

Presenter: Environmental Risk Analyst.

Audience: Operations Staff, Regulatory Compliance Team.

7. Aerospace:

Use: Evaluating risks in manufacturing and design processes.

Presenter: Quality Assurance Lead.

Audience: Design Engineers, Quality Control Technicians