Companies can measure risk capacity in terms of liquidity and capital reserves, as well as management capabilities and track record in managing the specific risks.″

Each student is required to select a company and gather pertinent information from multiple sources. The RAS is described in Chapter 3 as. Other sources include SEC (Links to an external site.), Bloomberg, and many more online. Each student will present a company profile, a risk appetite statement (RAS), and a detailed company risk profile. ″An RAS is a board-approved policy that defines the types and aggregate levels of risk that an organization is willing to accept in pursuit of business objectives. In determining the appropriate risk appetite, an organization should also consider its risk capacity (also known as risk-bearing capacity), which represents a company′s overall ability to manage the risk and absorb potential losses. Companies can measure risk capacity in terms of liquidity and capital reserves, as well as management capabilities and track record in managing the specific risks.″ And our author highlights a dynamic RAS would include the following components: Qualitative statements and guidelines, as well as quantitative metrics and risk tolerance levels for all key risks. A cascading structure of risk tolerance levels with drill-down capability from the board (Level 1) to executive management (Level 2) to business units (Level 3). Continuously updated RAS dashboard reports, including commentaries and expert analysis. Risk-mitigation strategies and exception reporting in the event risk exposures are above tolerance levels. Dynamic adjustments to tolerance levels to reflect risk-return opportunities. For example, if the market provides attractive return opportunities and the company has excess risk capacity, the risk tolerances may be increased accordingly. You will be allowed to use a companies RAS and risk profile if the company has formerly created these. Risk statements can be found in 10Q and 14Q filings with the SEC.