ERM Glossary: Risk appetite

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An entity’s risk appetite is the degree of risk it is willing to accept in order to achieve objectives. Implicitly it requires that the objectives are specified as entity-wide targets/limits with detailed breakdowns.

A risk appetite statement is an articulation of this risk appetite and a risk appetite framework is a structure used to identify what risk appetite should be adopted. In 2013, the Financial Stability Board articulated principles on what constituted an effective risk appetite framework and an effective risk appetite statement.

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