Measuring Risk Appetite
Precise measurement is not always possible and risk appetite will sometimes be defined by a broad statement of approach. An organisation may have an appetite for some types of risk and be averse to others, depending on the context and the potential losses or gains.
However, often measures can be developed for different categories of risk. For example, it may aid a project to know what level of delay or financial loss it is permitted to bear. Where an organization has standard measures to define the impact and likelihood of risks, this can be used to define the maximum level of risk tolerable before action should be taken to lower it.
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