Risk Appetite Framework

A Risk Appetite Framework is a structured approach that organizations use to define how much risk they are willing to take in pursuit of their goals. It helps balance potential rewards against the possible downsides. By understanding their risk tolerance—essentially the level of uncertainty they're comfortable with—companies can make informed decisions about investments, projects, and strategies. This framework guides decision-makers in assessing risks against the organization's capacity to absorb losses, ensuring that risks align with their overall objectives and values.