Levels of Risk Appetite
The appropriate level will depend on the nature of the work undertaken and the objectives pursued. For example, where public safety is critical (e.g. operating a nuclear power station) appetite will tend to be low, while for an innovative project (e.g. early development on an innovative computer program) it may be very high, with the acceptance of short term failure that could pave the way to longer term success. Below are examples of broad approaches to setting risk appetite that a business may adopt to ensure a response to risk that is proportionate given their business objectives.
Averse Avoidance of risk and uncertainty is a key organisation objective.
Minimal Preference for ultra-safe options that are low risk and only have a potential for limited reward.
Cautious Preference for safe options that have a low degree of risk and may only have limited potential for reward.
Open Willing to consider all potential options and choose the one most likely to result in successful delivery, while also providing an acceptable level of reward and value for money.
Hungry Eager to be innovative and to choose options offering potentially higher business rewards, despite greater inherent risk.
The appropriate approach may vary across an organization, with different parts of the business adopting an appetite that reflects their specific role, with an overarching risk appetite framework to ensure consistency.
Read more about this topic: Risk Appetite
Famous quotes containing the words levels of, levels, risk and/or appetite:
“Pushkin’s composition is first of all and above all a phenomenon of style, and it is from this flowered rim that I have surveyed its seep of Arcadian country, the serpentine gleam of its imported brooks, the miniature blizzards imprisoned in round crystal, and the many-hued levels of literary parody blending in the melting distance.”
—Vladimir Nabokov (1899–1977)
“Almsgiving tends to perpetuate poverty; aid does away with it once and for all. Almsgiving leaves a man just where he was before. Aid restores him to society as an individual worthy of all respect and not as a man with a grievance. Almsgiving is the generosity of the rich; social aid levels up social inequalities. Charity separates the rich from the poor; aid raises the needy and sets him on the same level with the rich.”
—Eva Perón (1919–1952)
“Maybe we were the blind mechanics of disaster, but you don’t pin the guilt on the scientists that easily. You might as well pin it on M motherhood.... Every man who ever worked on this thing told you what would happen. The scientists signed petition after petition, but nobody listened. There was a choice. It was build the bombs and use them, or risk that the United States and the Soviet Union and the rest of us would find some way to go on living.”
—John Paxton (1911–1985)
“Hunger is never delicate; they who are seldom gorged to the full with praise may be safely fed with gross compliments, for the appetite must be satisfied before it is disgusted.”
—Samuel Johnson (1709–1784)