Firstly, I would suggest that boards of directors should take a close interest in ensuring that their financial services firm has in place a high quality risk appetite statement that is well understood and implemented throughout the firm in practice.
A clear articulation of the acceptable level of risk undertaken by a firm, for example in terms of potential lending, investment portfolio or insurance underwriting losses expressed in terms of P&L or balance sheet events at different confidence intervals, is an important discipline and an essential complement to a well-articulated business strategy.