2 Risk appetite
One key concept that is central to risk management – and which is referred to by COSO – is ‘risk appetite’. The appetite that an organisation has for risk reflects, among other things, its financial strength and also its culture for taking risks. Take a look at Video 2 to get an understanding of the factors that determine risk appetite.
Now watch Video 3 to learn what risk appetite means for experts.
Transcript: Video 3 What does risk appetite mean?
And for most businesses, that's set against the level of reward that you're intending to receive. So I think a great analogy here would be that the financial markets where the more risk you're prepared to take, the more reward you can get. So risk appetite there is about saying how much risk am I prepared to take, how much money am I prepared to lose in seekingreturns.