Risk Appetite

Risk appetite represents the balance organisations aim to achieve between opportunities and the threats that change can present. Risk is inherent to the provision of healthcare but needs to be identified, assessed and managed. It is essential for the Boards of NHS Foundation Trusts to be clear about their appetite for, and tolerance of risk. Doing so prevents them from taking excessive risks while at the same time enabling the organisation to take advantage of opportunities such as developing new services or expanding existing ones.

The proposed statement defines risk appetite across five domains:

• clinical quality;
• finances;
• workforce;
• compliance with regulatory standards; and
• reputation (defined as relationships with external stakeholders).

Risk appetite is measured using a six point scale which ranges from ‘significant’ appetite to risk, to none. Risk tolerance is defined in terms of the maximum target score (the level to which we aim to mitigate the risk, not the level which the risk is at currently) that is acceptable for risks in each domain. For each domain there is a short narrative which explains the approach to that type of risk and what it means in practice.