How risk appetite affects risk policy
Risk appetite has an important influence on the risk strategies an organisation has in place.
Seeking to avoid risks and withdraw from risky situations
Actively seek risk, in the belief that higher the risk equals higher the returns.
Risk averse organisation
For example: a charity or public sector organisation will be characteristically risk averse – the organisation would seek to avoid risky situations.
Therefore the risk management system the organisation develops may be less sophisticated and less costly.
Risk seeking organisation
Conversely an organisation actively seeking additional risk, financial derivative
traders for example.(Further to search my articles on it) Should:
; see risk management as of strategic importance
; invest in a comprehensive risk management system.