The image above is a simplified picture of the RARA model that describes how Risk Appetite and Risk Attitude are connected, and how they can be understood and managed as part of active risk management.

As is always the case, the central consideration is the situation and the objective(s) you are trying to achieve. Risk Appetite is internal and intangible – we do not have obvious ways to express it – but we can express measurable risk thresholds that represent the degree to which we are prepared to vary from our objective(s).

Doing this is not enough however because it may be that our current Risk Exposure does not fit within the thresholds.

The point of control is our chosen Risk Attitude – this can be understood and managed as described in books and papers/presentations featured on the rara web site.

If you can invest a further half hour with David Hillson, the Risk Doctor, I propose that you watch this video.

David exposes the ABC Model and explains why risk culture matters so much. He offers an easy way to assess your organization’s risk culture and a model named the 6 A’s to help you manage risk culture in a proactive manner.