Risk Appetite

What will you do, or perhaps more importantly, what won’t you do to accomplish your goals?

This question – and the balancing act required to answer it – drives strategic decisions for your credit union. Regulatorily, operationally and strategically, developing a risk appetite program can help drive the best outcomes.

As complexities increase, the process of identifying risks and putting in the proper controls has become paramount. However, simply maintaining close watch as new risks develop and applying the appropriate mitigation only tells a portion of the story. Having a fundamental understanding of your personal and organizational appetite for risk and ensuring alignment with organizational objectives sets the foundation for sound decision-making, and gives you a path to achieve your strategic goals and overall vision.

Rochdale’s Risk Appetite Program, led by a team of industry and risk experts, helps formalize your credit union’s appetite for risk while creating clear boundaries. Through our customized survey and fact-gathering process, take decision-making from “feeling-based” to “fact-based.”

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Determining the amount of risk your credit union is willing to assume involves two key components:

1. Risk appetite.
How much risk are you comfortable assuming in pursuit of organizational objectives?

2. Risk tolerance.
What’s your ability to endure a loss beyond the stretches of your Risk Appetite for the sake of achieving your goals and objectives (knowing those will change over time)?

Determining risk appetite and defining key performance indicators (KPIs) and key risk indicators (KRIs) will help ensure everyone in the organization – from the board to the front-line tellers – are acting in accordance with acceptable levels of risk to propel your organization to new heights.

What’s the right amount of risk?

How do you know the right amount of risk? Are you playing it too safe? Our proprietary assessment process highlights gaps between your current risk posture and your overall risk appetite—and how well the board’s risk appetite is aligned with management’s. This process provides the visibility needed to course correct and take advantage of potential strategic opportunities, while improving alignment.

Defining risk appetite is a vital first step to build an effective risk management program and achieves:

  • An understanding of the types and amount of risk appropriate for your credit union
  • New opportunities to be more competitive in your respective markets
  • Confidence across the organization, allowing team members to perform their jobs without fear of “going too far”
  • Identification of alignment between management and the board, providing visibility into areas for further education regarding risk
  • Confidence to take the risk required to remain relevant into the future
“Rochdale stands out in our industry as an innovator and leader in the ERM movement. We partnered with Rochdale to conduct a Risk Appetite Survey with our board and senior management team. The ensuing dialogue, facilitated by Rochdale, itself had tremendous value in terms of removing unclear expectations and murky interpretation between senior management and the board, and even within the board itself. The end product provided us with valuable guide rails around risk appetite profiles by crafting clear risk appetite statements and agreeing upon the metrics we use to hold ourselves accountable going forward. Wherever your credit union is in its ERM evolution, I recommend partnering with Rochdale to move your program forward.”
– Nav Khanna, EVP
Travis Credit Union, Vacaville, CA

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