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ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk

Halden Energy's board sets a risk appetite statement that tolerates high risk in new-market ventures but none for safety breaches. Business unit heads are rewarded only on short-term profit and rarely escalate safety near-misses. Which action would most directly align behaviour with the stated appetite?

Build safety and risk-escalation into performance measures and rewards, and have senior leaders visibly act on near-misses. Incentives and leadership behaviour shape culture, so this aligns conduct with the zero tolerance for safety breaches, whereas publicity, extra committees or insurance would not change behaviour.

  1. APublish the appetite statement more widely without altering any other arrangements
  2. BCreate a further committee to review near-misses annually
  3. CInclude safety and risk-escalation measures in performance and reward, and have senior leaders visibly act on reported near-missesCorrect
  4. DTransfer all safety risk to an insurer so that it no longer needs managing

Explanation

Behaviour follows incentives and visible leadership responses, so tying reward to safety and escalation and acting on reports links appetite to practice. Publicity alone leaves the profit-only incentive in place, an annual committee is too slow, and insurance transfers financial loss but not the zero tolerance for breaches or the underlying culture.

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