Risk appetite
The amount and types of risk that an organisation is willing to accept in pursuit of value, improved financial performance or of other benefits, with management responsible for setting boundaries or parameters for risk taking.
Risk appetite will be within or equal to the maximum risk tolerance. Any risk responses should be designed such that the 'net' (residual) risk after considering controls does not exceed these boundaries.
In the non-financial sector, risk appetite is sometimes also known as risk attitude, risk capacity or risk tolerance.
'Conservative' strategies are those in which only the lowest levels of risk are acceptable.
More 'aggressive' approaches to risk mean that higher levels of risk may be acceptable, if they are appropriately rewarded.
The risk appetite will be determined within the maximum risk capacity, in order to achieve the strategic objectives and business plan.
See also
- RAF
- Rewarded risk
- Risk averse
- Risk capacity
- Risk management
- Guide to risk management
- Risk policy
- Risk register
- Risk tolerance
Other links
Risk appetite and risk tolerance: Practical guidance, www.theirm.org
