Explanation:
A risk appetite statement serves as a high-level framework that defines the amount and types of risk an organization is willing to accept in pursuit of its strategic objectives. The primary function is to:
Why Option D is correct:
Why other options are incorrect:
Risk appetite statements help organizations balance risk and return by defining what level of risk is acceptable when pursuing strategic objectives.
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A growing regional bank has added a risk committee to its board. One of the first recommendations of the risk committee is that the bank should develop a risk appetite statement. What best represents a primary function of a risk appetite statement?
A
To quantify the level of variability for each risk metric that a firm is willing to accept.
B
To state specific new business opportunities that a firm is willing to pursue.
C
To assign risk management responsibilities to specific internal staff members.
D
To state a broad level of acceptable risk to guide the allocation of the firm's resources.
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