CMA Final · Strategic Performance Management and Business Valuation · Corporate Risk Management Performance
In corporate risk management, which statement best describes 'risk appetite' of an organisation?
Risk appetite is the amount and type of risk an organisation is willing to accept in pursuit of its objectives. It is a forward-looking statement of acceptable risk, not a record of past losses, premiums paid or risks that have already occurred.
- AThe amount and type of risk the organisation is willing to accept in pursuit of its objectivesCorrect
- BThe maximum loss the organisation has suffered in any past year
- CThe insurance premium paid annually to cover all identified risks
- DThe list of risks that have already materialised during the year
Explanation
Risk appetite is the level and type of risk an entity is prepared to accept while pursuing its objectives. Past losses, insurance premiums and materialised risks are records or treatments, not the willingness to take risk.
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