Risk appetite

Okay.

Let's just talk a little bit now, you know, about risk appetite, about behavior, and how the brain tells you what to do and what not to do.

Risk appetite in specific, what is that? You know, does it become clear once I lose 10 lakhs? I mean, everybody starts with the thing that I've got a lot of risk appetite.

It's okay if the, the portfolio doesn't perform for one year, two years, three years.

But the minute my portfolio is down 10, 20%, I'm in a different zone.

What is the brain telling me? How is the brain functioning? What is the neuroscience behind this and behind risk appetite?

So I, I'll divide that into two parts.

One is what's your experience been? Like you rightly said, if you have that experience that, okay, there will be big dips, but I'm fine-

They want pieces of paper that's called a risk framework.

They want recent paper that has that's called a risk appetite statement.

They were risk culture surveys and all of these interesting confections.

that really don't explain at all how well the organization is making decisions.

And in our book, for example, we talk about The Boeing issue, we talk about a range of disasters where, in all cases, the regulators have ticked the box as paper has been produced, the lists of risks have been published, the rest of it, but they don't actually pertain to real decision making that matters, that led to this organization failing, a disaster occurring, or something like that.

So I think regulators in many ways have not had clarity as what they want.

And from personal experience, I've met regulators in Australia when they wanted, for example, to ask organizations to produce risk appetite statements.

And I've said, OK, what purpose do you think that this will serve? And what criteria can I judge what I've produced against? How will I know if I've produced something which you're satisfied with? And the answer came back, we don't know.

And, uh, it comes to the control, and the, the third topic is that, uh, per- it's a personal decision.

It's about risk appetite of one, one decision maker.

Risk, and this is the most criteria that you are as a, as an entrepreneur, as a seller in scanning.

Risk appetite with a general manager or, or a decision manager.

What does it mean? People do have...

There are two type of patterns of people.

People with very high risk appetite and very low risk appetite.

My customers are the guys that they, they, they don't like risks.

And we're just in that same pattern.

What happens is the risk appetite gets insane.

Society starts to... kind of collapse isn't the right word but

a gamble at degrade yeah

And that could throw a floor under any equity sell-off and would be positive for equity appetite.

So this week, I certainly believe that bad news from the jobs data could echo as good news across the financial markets, especially for risk appetite.

But for the magic to operate, we need pre-prices to remain in check.

On the individual front, Dell announced better-than-expected

Right.

Now, we always hear about the company or the board's risk appetite.

What does a genuinely useful risk appetite look like? How should it influence real board decisions rather than being a policy that is sitting on a server somewhere?

That's a really good question, and there's lots of confusion still about what risk appetite is, and I won't go into great detail about how to find it.

But the most important key here to get your risk appetite is understand your organisation.

Understand your development plan, your business plan, your strategy, where you want to head.

And when you're doing that, especially as a team, you start to identify your appetite for risk.

How much can we do this? And also your tolerance for risk.

While investors crave detailed forward guidance, one could infer a degree of anxiety from NVIDIA officials seeking to keep investors happy.

Risk appetite got a bit of a boost overnight, but conviction remains low, with the Nasdaq one hundred lacking the momentum to climb towards the mid-August peak.

There are still lingering concerns about a plethora of issues preventing investors from becoming aggressively bullish in risk assets.

Specifically, the Middle East remains a headache for market participants as the negotiations between Oman and Iran continue, but this ongoing process has yet to yield concrete results.

Uh, Exim is Ministry of Trade, and of course, Pembangunan with the Ministry of Finance.

So we follow with the mandate from the government policies, and we complement with some of the gaps in the financing where the commercial banks, um, may, uh, can come in or based on certain risk appetite or returns, and we will see how we can complement that-

Mm

... to ensure that the liquidity and funding, uh, is, is... can, can come in.

Uh, you have less effort and much better asset quality as well.

So what stops Adfin and the DFIs from drifting to the easy route?

route?Well, uh, the first key parts in any financial institution is what form of risk appetite that are we willing to look at.

And this is a very rigorous process, uh, uh, and I believe in all of the development finance institutions.