Risk acceptance

Every enterprise has to have a level of risk that it will accept otherwise it is impossible to do business. Risk represents both an opportunity to make profit and the potential to make losses. What is important to the organisation is to manage its risks so as to balance the opportunities against the potential losses for the overall good of the business.

The amount of risk that an organisation is prepared to take is often known as its 'risk appetite' or 'risk tolerance'. It varies from one organisation to another depending upon the culture, the industry, the line of business and the potential gains. It may also be affected by the spread of risk over several lines of business, several geographic locations or over other structural factors that mean the proverbial 'eggs' are not placed in 'one basket'.