Indeed, the retention level has to be fixed by the management relying on the aggregate annual impact of the risks on the financial statements and ratios of the group rather than simply complying with a market demand or considering the arbitrary concept of " risk appetite ", as it is often referred to.

In addition, the appropriate retention level must be determined on the basis of the surplus between the total financial capacity of the group and the financing it needs in order to achieve its core strategic priorities.

Furthermore, limiting the analysis to the direct impact of risks is not sufficient, since all the chain reactions generated by the risks on the balance sheet, as well as on the refinancing costs and capacity of the group, have to be estimated in order to obtain reliable results.

Thus a comprehensive modeling of the financial sensitivity of the group has to be carried out in order to define to what level of risk the impact is sustainable and above what level the risk has to be transferred to third parties. It also makes it possible to identify the most sensitive ratios requiring protection. The results differ widely from one company to another (even between companies of same size and from same sector) as they are governed by various parameters : financial structure, debt ratio, liquidity ratio, investors' perception, etc.

Ideally, this analysis has to be performed not only at group level but also at business unit level, since the retention capacity and the chain reactions can be very different, depending on the financial specifics of each entity.