19. Central Bank of Brazil: Investment Decision-Making in an Integrated Risk Management Framework

Risk management is an evolving discipline. Its contribution to protect the integrity of an organization is well-known. The primary objective of the risk function is to establish a structural and process-driven environment that facilitates the achievement of the organization’s objectives, mitigate risks whenever possible, and control residual risks. Combined, they improve the organization’s resilience in case of risk incidents. Nevertheless, the risk function today goes beyond its traditional role of reporting and controls. It plays a fundamental role in the organization’s operational and strategic decision-making processes. A pro-active approach therefore creates, collects, and disseminates information about all organizational risks. Risk information properly intertwined in the decision-making process, combined with a robust governance can minimize decisions biases and, consequently, foster a better alignment between strategic objectives, risk appetite and decisions. This chapter discusses how risk information can substantially impact the investment decision-making, improving decision quality and increasing transparency.