What is Risk Appetite?
Risk Appetite refers to the level and type of risk an organization is willing to accept in order to achieve its objectives. It sets boundaries for decision-making and helps balance risk and reward.
For example, a bank with a high-risk appetite might lend to startups for higher returns, while a conservative bank may focus on safe, low-risk loans.
Importance:
- Guides strategic decisions
- Aligns risk-taking with business goals
- Supports compliance and regulatory frameworks
- Enhances stakeholder confidence
In short, risk appetite helps organizations take calculated risks while protecting against unwanted surprises.
