Risk Tolerance Clarified

With Risk Tolerance Clarified’s software, you choose the view of risk tolerance that matters to the organization: your metrics, your thresholds, your priorities.

While both risk and treasury professionals understand the importance of a well-defined risk tolerance, the process used to determine acceptable levels of risk is too often a ‘black box’.

A lack of risk tolerance transparency could be due to limited access to reliable data, or business areas prioritizing different metrics, such as free cashflow, debt covenants, or earnings per share. This can leave understandings of risk tolerance misaligned across the organization, hard-to-track across reporting periods, and opaque to stakeholders.

A clearly-defined risk tolerance should be the bedrock for all business decisions. To achieve this, you need a transparent view that you control.

Risk Tolerance Clarified allows you to:

• Create explicit statements on risk tolerance and risk-bearing capacity customized to your organization’s financial goals, with transparent metrics and thresholds you control
• Define what an adverse event is for your organization, and put numbers around the level of loss that would imperil your financial resilience or negatively impact your organization’s credit rating
• Evaluate the impact of changing financial dynamics on your organization, because a smart risk financing or business investment today may not prove as smart tomorrow
• Understand the realities of your organization’s financial standing, what this communicates about your solvency, your financial constraints, earnings power and use of cash flow, and how this compares to your peers
• Generate forward-looking financial projections by customizing the financial priorities as defined by you
• Gain a common financial framework to create objectives, communicate with stakeholders and demonstrate the value of risk investments to your organization’s financial health.

You can incorporate Risk Tolerance Clarified into your enterprise risk management and operational risk considerations within a best practice risk governance framework. Alternatively, you can use the tool as part of your quarterly financial reporting and to evaluate planned significant investments or changes to your corporate structure.

Using Risk Tolerance Clarified alongside related risk analytics can also generate management decisions based on deeper, more precise perspectives on the impact of risk.