CRISC · Question #494
Which of the following describes the relationship between risk appetite and risk tolerance?
The correct answer is D. Risk tolerance may exceed risk appetite. Risk appetite defines the overall strategic level of risk an organization is willing to accept, while risk tolerance specifies the acceptable deviation from that appetite for specific objectives or activities.
Question
Which of the following describes the relationship between risk appetite and risk tolerance?
Options
- ARisk appetite is completely independent of risk tolerance.
- BRisk tolerance is used to determine risk appetite.
- CRisk appetite and risk tolerance are synonymous.
- DRisk tolerance may exceed risk appetite.
How the community answered
(32 responses)- A6% (2)
- B3% (1)
- C3% (1)
- D88% (28)
Why each option
Risk appetite defines the overall strategic level of risk an organization is willing to accept, while risk tolerance specifies the acceptable deviation from that appetite for specific objectives or activities.
Risk appetite and risk tolerance are closely related and interdependent concepts within an organization's risk management framework.
Risk appetite is a broader, strategic statement that guides the establishment of more specific risk tolerances, not the other way around.
Risk appetite and risk tolerance are distinct but related concepts, with appetite being a general strategic statement and tolerance defining specific operational limits.
While risk tolerance is generally established within the boundaries of risk appetite, it may define specific quantitative limits that, for certain risks, quantitatively exceed a target or preferred appetite level, as long as they remain within the organization's ultimate willingness to accept risk.
Concept tested: Distinction between risk appetite and risk tolerance
Source: null
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