What are the features of a well-crafted Risk Appetite Statement (RSA)?

A Risk Appetite Statement (RAS) is a document that clearly states how much and what type of risk a bank is willing to take while achieving its business objectives.

Features of a well-crafted Risk Appetite Statement:

(1) It should be reviewed and approved by the Board of Directors at least once a year.

(2) It should be consistent with the bank’s overall strategy, objectives, and stakeholders’ expectations.

(3) It should cover all major risks and clearly state which risks the bank is willing to take and which risks it wants to minimize.

(4) It should clearly state the level of risk the bank is willing to accept and set appropriate limits for major risks.

(5) It should recognize that some losses are a normal part of banking and set realistic limits for acceptable losses.

(6) It should consider whether the bank has enough employees, technology, capital, and other resources to manage its risks properly.

(7) It should include specific and measurable limits. For example, the bank may set a maximum loan growth limit of 10% per year or BDT 500 crore.