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:
“The country is fed up with children and their problems. For the first time in history, the differences in outlook between people raising children and those who are not are beginning to assume some political significance. This difference is already a part of the conflicts in local school politics. It may spread to other levels of government. Society has less time for the concerns of those who raise the young or try to teach them.”
—Joseph Featherstone (20th century)
“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)
“The appetite for power, even for universal power, is only insane when there is no possibility of indulging it; a man who sees the possibility opening before him and does not try to grasp it, even at the risk of destroying himself and his country, is either a saint or a mediocrity.”
—Simone Weil (1909–1943)
“I wonder if his appetite was good?
Or, if it were, if also his digestion?
Methinks at meals some odd thoughts might intrude,
And conscience ask a curious sort of question,
About the right divine how far we should
Sell flesh and blood.”
—George Gordon Noel Byron (1788–1824)