What is the purpose of a risk appetite statement?

A risk appetite statement serves to outline acceptable levels and types of risk for an organization. It communicates the amount and types of risk that the organization is willing to accept in pursuit of its objectives, thereby guiding decision-making and resource allocation. By clearly defining these parameters, it helps ensure that all stakeholders understand the organization's tolerance for risk, enabling them to align their activities with strategic goals.

This clarity fosters a culture of risk awareness and informed decision-making, allowing the organization to engage with risk in a balanced manner. It is essential for risk management, as it informs how much risk is acceptable and helps in prioritizing efforts to manage different kinds of risks accordingly.