Pure Indicator of Risk Appetite

Dupuy, Philippe

doi:10.1111/j.1467-8454.2009.00361.x

Cited by 14 publications

(10 citation statements)

References 9 publications

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“…Hence, all the definitions in Table would be difficult to justify, perhaps with the exception of that of Dupoy, which expresses that risk appetite is the investor's willingness to buy risky assets. Following this definition, we can meaningfully speak about an appetite for a type of assets, the risky ones, tacitly assuming that these would generate values.…”

Section: Review and Discussion Of Existing Ways Of Defining And Intermentioning

confidence: 99%

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On the Meaning and Use of the Risk Appetite Concept

Aven¹

2012

Risk Analysis

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The risk appetite concept has been given considerable attention recently in enterprise risk management contexts. A number of definitions exist, most with a link to risk acceptability, but also values and goals. The usefulness of the concept is, however, disputed; some authors argue that we can in fact do better without it. In this article, we provide a thorough discussion of what the risk appetite concept is actually trying to express and how it best can be used in the relevant decision making. The main purposes of the article are (i) to argue that the risk appetite concept, suitably interpreted, has a role to play in risk management, (ii) to show that the risk appetite concept is well supported by some types of risk perspectives and not by others, and (iii) to show how the risk appetite concept is linked to other related concepts, such as risk seeking and risk acceptability. The risk perspectives studied range from expected value and probability based definitions of risk to views on risk, that are founded on uncertainties.

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Section: Review and Discussion Of Existing Ways Of Defining And Intermentioning

confidence: 99%

“…In economic theory and analysis, several authors have discussed how to measure risk appetite based on historical performance data . The authors refer to specific economic contexts and model frameworks, which will not be further discussed in this article.…”

Section: Review and Discussion Of Existing Ways Of Defining And Intermentioning

confidence: 99%

On the Meaning and Use of the Risk Appetite Concept

Aven¹

2012

Risk Analysis

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“…Nevertheless, academic research on risk appetite remains limited. Existing studies on risk appetite were mostly conducted in finance and economics (Muralidhar and Berlik, 2017), where scholars often equate risk appetite with conventional terms such as 'risk aversion', 'risk tolerance' or 'risk preference' and define it as an investor's willingness to buy risky assets (Dupuy, 2009;Gai and Vause, 2006). These scholars also tend to view risk appetite as an individual-level, rather than organisational-level concept, primarily associated with taking investment risk (Belghitar and Clark, 2012;Kaufmann et al, 2013).…”

Section: The Concept Of Risk Appetitementioning

confidence: 99%

Factors that shape a hotel company’s risk appetite

Zhang

Paraskevas

Altınay

2019

International Journal of Hospitality Management

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Despite a growing scholarly interest in risk management within the field of hospitality, risk appetite, which plays a key role in effective risk management, has not yet received wider attention. This paper contributes to our understanding of risk appetite by exploring the factors that influence risk appetite in a hotel company context. Through in-depth interviewing with risk appetite experts and corporate-level hotel executives, we identified two sets of factors ('primary' and 'secondary') that influence a hotel compan's risk appetite. Although, at corporate level, these factors do not differ from other industry contexts, they can be used by managers in the hotel sector as a starting point to understand drivers and inhibitors of their companies' risk appetite while researchers can use them as a basis to develop descriptive or predictive models of a hotel company's risk appetite.

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“…A more basic challenge for anyone seeking to use risk appetite discourse for any purpose is that of articulating actual risk (see for example Kaplan and Garrick, 1981;March and Shapira, 1987;Hansson, 2004Hansson, , 2010Althaus, 2005;Campbell, 2006;Aven and Renn, 2009;Boholm and Corvellec, 2011;Aven, 2013b;Marshall and Ojiako, 2013), hypothetical future risk linked to strategic options (Miller and Waller, 2003), and thereafter risk appetite itself at entity level (Dupoy, 2009;Hillson, 2012;Aven, 2013a;Hassani, 2015). Arguably, from the literature (Willams, 1994;Patterson and Neailey, 2002;Agarwal and Ansell, 2016), the strategic risk register mechanism is useful for the first two of these tasks.…”

Section: Analytical Frameworkmentioning

confidence: 99%

“…Working within Hirschmann's framework, this critical review paper contributes to risk appetite literature (Dupoy, 2009;Hillson, 2012;Aven, 2013a;Hassani, 2015;Hoskisson et al, 2017), by developing a more novel critical analytical framework than is currently available. To develop its critical insight into corporate use of the risk appetite metaphor, the paper also draws upon a particular trinary cluster of psychocultural problems associated with excessive risk-taking in large corporations (Marshall et al, 2015, p. 497), to furnish the discussion of the various flaw categories of risk appetite.…”

Section: Introductionmentioning

confidence: 99%

A futility, perversity and jeopardy critique of “risk appetite”

Marshall

Ojiako

Chipulu

2019

IJOA

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Purpose Risk appetite is widely accepted as a guiding metaphor for strategic risk management, yet metaphors for complex practice are hard to critique. This paper aims to apply an analytical framework comprising three categories of flaw – futility, perversity and jeopardy – to critically explore the risk appetite metaphor. Taking stock of management literature emphasising the need for metaphor to give ideation to complex management challenges and activities and recognising the need for high-level metaphor within strategic risk management in particular, the authors propose a means to scrutinise the risk appetite metaphor and thereby illustrate its use for further management metaphors. Design/methodology/approach The authors apply a structured analytical perspective designed to scrutinise conceivably any purportedly progressive social measure. The three flaw categories are used to warn that organisational risk appetite specifications can be: futile vis-a-vis their goals, productive of perverse outcomes with respect to these goals and so misleading about the true potential for risk management as to jeopardise superior alternative use of risk management resource. These flaw categories are used to structure a critical review of the risk appetite metaphor, which moves towards identifying its most fundamental flaws. Findings Two closely interrelated antecedents to flaws discussed within the three flaw categories are proposed: first, false confidence in organisational risk assessment and, second, organisational blindness towards contributions of behavioural risk-taking to true organisational risk exposure. A theory of high (over-optimistic, excessive or inappropriate) risk-taking organisations explores flaws within the three flaw categories with reference to these antecedents under organisational-cultural circumstances where the risk appetite metaphor is most needed and yet most problematic. Originality/value The paper is highly original in its representation of risk management as an organisational practice reliant on metaphor and in proposing a structured means to challenge it as a dominant guiding metaphor where it has gained widespread uncritical acceptance. The discussion is also innovative in its representation of high risk-taking organisations as likely to harbour strong managerial motives, aptitudes and capacities for covert and illicit forms of risk-taking which, being subversive and sometimes reactionary towards risk appetite specifications, may cause particularly serious futility, perversity and jeopardy problems. To conclude, the theory and its implications are summarised for practitioner and educational use.

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Pure Indicator of Risk Appetite

Cited by 14 publications

References 9 publications

On the Meaning and Use of the Risk Appetite Concept

On the Meaning and Use of the Risk Appetite Concept

Factors that shape a hotel company’s risk appetite

A futility, perversity and jeopardy critique of “risk appetite”

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