Continuing care retirement communities: Integrating risk appetite and tolerance into strategic planning

Continuing care retirement communities (CCRCs) face the challenge of balancing resident care, regulatory compliance and financial sustainability. To navigate this complexity, boards and C-suite leaders must integrate risk appetite and tolerance into their strategic planning processes. This integration is not just beneficial — it is essential for ensuring the well-being of residents, maintaining stakeholder confidence and securing the community's long-term success.

Understanding risk appetite and tolerance

Risk appetite provides insight into the amount and type of risk an organization is willing to accept to achieve its strategic goals. Conversely, risk tolerance sets the specific boundaries within which the organization will operate as it manages individual risks. These concepts provide a strategic tool for boards and C-suite leaders, clarifying which risks are necessary for growth and which are unacceptable based on organizational values and capacity.

Creating and adopting a well-defined risk appetite and tolerance framework aligns risk-taking with strategic goals, fosters consistency and transparency in decision-making and empowers leaders to seize opportunities confidently while avoiding unacceptable exposures. By embedding these principles into strategic planning, leadership ensures that risk is managed proactively and strategically — transforming it from a threat into a catalyst for sustainable growth and resilience.

Strategic alignment: Safeguarding mission and growth

Defining, creating and integrating risk appetite into the organization allows for growth and innovation while protecting the CCRC’s mission. By setting clear risk boundaries — such as acceptable debt levels, occupancy targets and market exposure — leadership can prioritize initiatives that align with resident needs and organizational resilience. Insights foster cohesive decision-making and ensure strategic objectives support quality care and financial health. A well-defined risk appetite enables CCRCs to invest confidently in new services, facility upgrades or care innovations grounded in a shared understanding of acceptable risk.

During the 2008–2010 recession, for example, many CCRCs faced serious challenges due to over-leveraging and unclear risk limits. WindsorMeade — a CCRC in Williamsburg, Virginia — opened in 2008 with $114 million in bonds but was forced to file for Chapter 11 bankruptcy amid financial distress, only saved by restructuring and significant debt reduction. Conversely, projects with well-defined risk appetites, such as maintaining strong reserves and limiting variable-rate debt, fared better in occupancy retention and resident security.