Risk Appetite

[Gerard Chan]

Hi David

I'm not able to clearly differentiate risk appetite vs risk tolerance? Would you be able to help clear this confusion?

What about risk capacity? It's risk capacity = risk tolerance?
Thank you.

 

[David Harper CFA FRM]

Hi CJL,

Did you try question 301.3 http://forum.bionicturtle.com/threads/p1-t1-301-enterprise-risk-management-erm.6666/
... i don't want to spoil the fun for you

If you want more, my question is based on the assigned IFC reading, which includes a distinction between risk appetite and risk tolerance on page 15 here at
https://www.dropbox.com/s/k07g6j2dkwqzqcs/1. RiskTakingGovernancePrespective.pdf

Re: risk capacity: unlike risk appetite and risk tolerance (which i do experience as somewhat conventional at the corporate level), I don't experience that as a conventional term of art at the corporate (ERM) level. To me, it connotes a personal (individual) financial planning factor ... but that's just my view, perhaps somebody has defined it technically in the ERM context (but it's never appeared formally in the FRM, i can tell you), thanks,