Risk appetite and business objectives
The risk appetite of an organization should be agreed upon with the relevant stakeholders. It is important to align risk appetite with the objectives of the business to ensure that high-risk areas providing more value to the business are getting more resources than low-risk, low-reward processes.
The best way to align risk appetite with the business objectives is to translate it into a number of standards and policies to contain the risk level within the boundaries set by the risk appetite. With changing business conditions, these boundaries need to be regularly adjusted or confirmed.
Risk acceptance
Risk appetite and tolerance need to be defined, approved, and clearly communicated by the senior management with a process in place to review and approve any exceptions. These exceptions are formally documented in the form of risk acceptance.
As important as it might be to keep the risk levels within acceptable thresholds, there might be...
