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Risk appetite is a fundamental part of both risk management and capital management. NHFIC guides itself in fulfilling this obligation by setting its own standards for capital adequacy, drawing upon the experiences of domestic and international non-bank lenders, such as the Housing Finance Corporation in the United Kingdom.
The RAS sets the boundaries for the risks that NHFIC may accept in order to achieve its objectives within risk policies, risk tolerances and operational limits set by the NHFIC Act, Investment Mandate, PGPA Act and the Board.
The risk appetite for NHFIC represents the types and degree of risk that it is willing to accept for its stakeholders in its strategic and business actions.
NHFIC’s risk appetite is:
- Dynamic. The NHFIC Board will review the Risk Appetite Statement on a regular basis in conjunction with the Corporate Plan and relevant Government policies (such as the Investment Mandate).
- Defined. It requires NHFIC to operate within its defined tolerances and governance procedures.
- Encompassing. It provides a roadmap that guides its internal risk culture and sets boundaries defined by principles and metrics (both quantitative and qualitative) which are considered collectively.
- Judgement based. It recognises that articulating risk appetite is a complex process balancing many different views, but is ultimately a question of judgement.