![]() ![]() Risk attitude is also largely determined by the industry sector in which an organisation operates. In both cases, the organisations’ risk thresholds will be defined by their respective risk appetite and risk tolerance levels. In this case, the organisation will develop its risk response plan to prioritise the neutralisation (or optimisation, in the case of opportunity risks) of risk impacts rather than focussing on controlling the occurrence of risk events.Ĭonversely, an organisation with a low risk appetite, but high risk tolerance (a very unusual case!) will prioritise their risk responses by focussing on minimising the probability of risk event occurrence, and put less effort into controlling the risk impacts. This may be due to the fact that the organisation’s business strategy is to operate in unstable, or high threat environments, where they are constantly exposed to the occurrence of risk events. If an organisation has a high risk appetite but low risk tolerance, it will tend to prioritise its risk responses around the anticipated level of the risk impacts, rather than the level of uncertainty in risk event occurrence. Above the risk threshold, the stakeholder will not accept the risk. ![]() Below the risk threshold, the stakeholder will accept the risk. ![]() Risk Threshold – The level of uncertainty or impact at which a stakeholder will have a specific interest.Risk Tolerance – The degree, amount, or volume of risk impact that an organisation or individual will withstand.Risk Appetite – The degree of uncertainty an entity is prepared to accept in pursuit of its objectives.Risk Prioritisation by AttitudeĪn organisation’s risk attitude is made up of a combination of its risk appetite, risk tolerance and risk threshold. The process of risk prioritisation is affected by several factors including risk attitude, risk sensitivity, resource availability, risk severity and risk manageability. ![]()
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