Risk management framework

Our risk appetite framework outlines to the risks that we select and manage in pursuit of return, the risks we accept and retain at a moderate level as part of doing business and the risks we actively avoid or take action to mitigate as far as practical. It comprises:

• Risk appetites: Quantitative or qualitative overarching statements that express the level of risk the business is willing to accept (e.g. the amount of capital we are prepared to put at risk in the case of the solvency risk appetite). These are set at an aggregate level sometimes covering multiple risk types and act as hard constraints. The group has risk appetites for Solvency, Liquidity, Operational, Climate, Conduct and Reputational risk.
• Risk preferences: Qualitative statements that express where the business prefers to take risk (or else accept or avoid) and why, applied to individual risk types (e.g. equity and longevity).
• Risk tolerances: Quantitative or qualitative boundaries that may constrain specific risk-taking activities for individual risk types or combinations of risk types. Risk tolerances include solvency ratio risk tolerances which are expressed for some of our most material risk types.
• Risk Triggers: Thresholds used to monitor the capital exposure for other individual risk types (typically not already covered by a specific risk tolerance).
• Risk limits: Quantify more granular limits for specific defined risk exposures (e.g. maximum credit exposure limits to particular counterparties). 

Our risk appetites and preferences are clearly defined and are refreshed on a regular basis.

You can read more about our approach to risk in the Risk and Risk Management section (PDF 169KB) of our Annual Report and Accounts.