• What is the difference between Risk Appetite and RiskTolerance?• Define each term.• Contrast these terms highlighting their differences.• What purpose do they serve and how are they used...

Running Head: MANAGEMENT                                1
MANAGEMENT                                        4
MANAGEMENT
Table of Contents
Risk Appetite    3
Risk Tolerance    3
Differences    3
References    5
Risk Appetite
Different types of risk taken by a company to accomplish its objectives are referred as risk Appetite. It is not possible for the organizations to avoid all risks so it is required to accommodate certain risks and take actions simultaneously to mitigate them. According to Martens and Rittenberg (2020) this will help in reducing their impact and transferring their effect to activities which can lead to minimum loss. ERM programs are quite helpful in this direction as they help to put controls before risks are acceptable to an organization. After placing controls the left over or residual risk is accepted by the companies.
Risk Tolerance
The amount of deviation from risk appetite is known as risk tolerance. It can also be explained as the maximum risk taken in a specific direction by the company which helps it to be in its comfortable zone. Metrics are used to represent the unique nature of each risk taken by the company. According to Gilbey and Purchase (2022) it can be elaborated through acceptable...