Definition Of Risk Appetite

A recent thought paper by pricewaterhousecoopers pwc attempts to explain risk appetite in plain english.

Definition of risk appetite. Amount and type of risk that an organization is willing to pursue or retain. When risk levels fall outside that range performance is sub optimal. According to iso 31000 a risk appetite definition is the amount and type of risk that an organization is prepared to pursue retain or take the challenge with developing a risk appetite definition is how to implement and enforce it making it relevant to business units on a day to day and case by case basis. Risk appetite is the level of risk that an organization is willing to accept while pursuing its objectives and before any action is determined to be necessary in order to reduce the risk.

Organization s or stakeholder s readiness to bear the risk after risk treatment in order to achieve its objectives. Risk appetite is the level of risk that an organization is prepared to accept in pursuit of its objectives before action is deemed necessary to reduce the risk. What is risk appetite. This depends on the industry.

Coso defines risk appetite as the amount of risk on a broad level an organization is willing to accept in pursuit of value in many organizations risk appetite is a nice theoretical topic to discuss but it is rarely integrated into strategic planning. Pwc defines risk appetite as the amount of risk an organization is willing to accept in pursuit of strategic objectives. Different organizations will have different risk appetites. Iso guide 73 2009 risk management vocabulary defines risk appetite as the amount and type of risk that an organization is willing to pursue or retain.

It represents a balance between the potential benefits of innovation and the threats that change inevitably brings. Risk appetite is the amount of risk an organization is willing to tolerate while implementing a project. The amount of risk on a broad level an organization is willing to accept in pursuit of value.