What is risk appetite?

Risk appetite is the level of risk that an organization or project is willing to accept in order to achieve its goals. Put simply, it is a measure of readiness for risk, determining how much uncertainty and potential loss is acceptable during the process.

For example, a company with a high risk appetite may invest in innovative but risky projects, whereas an organization with a low risk tolerance will choose more conservative strategies.

Defining risk appetite helps manage risks purposefully, set boundaries for decision-making, and shape a risk management culture within the team or company.