Which term best describes an organization’s decision to undertake risks that offer a reasonable balance between potential benefits and potential harm, without significantly swaying towards either risk aversion or risk seeking?
The term 'Neutral' is used to describe an organization's approach to risk appetite where they are neither aggressive in seeking out risks that may offer substantial rewards nor overly cautious to the point of hindering potential growth. This approach aims for a balance between the two, with decision making that is well-calibrated to engage with risks that offer a reasonable trade-off between potential benefits and potential harm. 'Expansionary' suggests an aggressive stance towards growth and assuming more risk, while 'Conservative' indicates a more cautious approach that avoids risks. 'Risk Mitigation' is a strategy to reduce the impact of risks, but it does not describe an appetite for risk.
Ask Bash
Bash is our AI bot, trained to help you pass your exam. AI Generated Content may display inaccurate information, always double-check anything important.
What is risk appetite and how does it impact organizational decision-making?
Open an interactive chat with Bash
How does a 'neutral' approach to risk differ from 'expansionary' and 'conservative' approaches?
Open an interactive chat with Bash
How does 'risk mitigation' relate to risk appetite, and why is it not considered a type of risk preference?