Enterprise Risk Appetite

Overview

Risk appetite is the amount of risk that a company is willing to take in pursuit of its goals. Companies have to take a certain amount of risk in order to achieve its objectives, however, there is usually a limit to how much risk they are willing to take.

As part of risk appetite identification, a company may establish a set of risk thresholds, which set the maximum amount of variation in an outcome which is acceptable under the companys stated appetite.

Risk Budgeting

When risks are quantitatively comparable, a company may set a total risk appetite, and then partition that appetite among the various risks in a process known as risk budgeting.