Glossary term
Risk Profile
Subject: Risk Management, Risk Fundamentals and Frameworks
A risk profile is a description of the risks an organisation, unit or project faces at a point in time, showing their type, size and how they compare with its appetite.
Explanation
It is built by combining results from risk assessments, loss data, indicators and stress tests into one view. It may appear as a table, a heat map or a dashboard, split by risk category and business area, often with a trend arrow. A bank's profile might show credit risk rising, cyber risk steady and operational risk falling. Profiles help compare current exposure with appetite, so the board can see where it is running hot. It is a snapshot that changes as markets, strategy, controls and the outside world change, so it is refreshed regularly, commonly each quarter. The profile can be shown before controls, after them or both, so the basis should be stated. People also use the phrase for an individual investor's attitude to risk, which is a different meaning. Capital, strategy and control decisions are only as sound as the exposure picture they rest on.
Example
At each quarterly meeting, a mid-sized insurer's risk committee reviews a one-page profile. It shows underwriting risk within appetite, investment risk rising because of a shift into longer-dated bonds, and cyber risk high after a recent audit finding. The committee asks for dated plans on investment and cyber risk.
Not to be confused with
- Risk Register
- The register lists individual risks in detail; the profile is the summarised picture of overall exposure drawn from it and other data.