Risk appetite fields on the Risk form

Learn about the risk appetite fields on the Risk form. Use these fields to define the risk appetite, evaluate all the possible risks, and set the boundaries for acceptable and unacceptable risks in the Risk Management application.

See the following table for a description of the field values.

Note:

The risk appetite fields that appear on the entity form depends on the advanced risk assessment properties set by the risk administrator.

Table 1. Risk appetite fields on the Risk form

Field	Description
Override qualitative risk appetite	Option to override the qualitative risk appetite of the risk statement. By default, all risks inherit the risk appetite of the risk statement in the risk form. When you select this option, you can define the risk appetite values for the current risk separately. Note: This field appears only when there’s an associated risk statement available for the current risk.
Justification for override	Reason to override the qualitative risk appetite values of the risk statement in the current risk. This information helps the risk manager to understand the business need for the override. Note: This field appears only when the Override qualitative risk appetite option is selected.
Qualitative appetite	Risk appetite in numerical scale and rating terms. The qualitative appetite is compared with the qualitative risk rating to compute the qualitative appetite status. You can define the qualitative appetite based on the appetite scale set by the risk administrator. The default options are as follows: 1 - Averse 2 - Minimalist 3 - Cautious 4 - Open 5 - Hungry A risk administrator can change or create the risk appetite scales based on the organization's requirement. For more information, see Set up a risk appetite scale. Note: A risk user and risk reader with the sn_risk_advanced.qualitative_risk_appetite_reader role can only view the qualitative appetite and qualitative tolerance values on the form and in other places.
Quantitative appetite	Risk appetite in quantitative terms. The quantitative risk appetite can be measured and expressed in monetary values. The quantitative appetite is the amount of loss that an organization is willing to risk. For example, an organization decides to have $10,000 (US dollars) as the target non-performing asset (NPA) for this year, which means that the organization defines $10,000 (US dollars) as the quantitative risk appetite. The quantitative appetite is compared with the annual loss expectancy (ALE) to compute the quantitative appetite status. Note: A risk user and risk reader with the sn_risk_advanced.quantitative_risk_appetite_reader role can only view the quantitative appetite and quantitative tolerance values on the form and in other places.
Qualitative tolerance	Risk tolerance in numerical scale and rating terms. The risk tolerance is the standard deviation from the defined risk appetite. The qualitative tolerance is compared with the qualitative risk rating to compute the qualitative appetite status. The qualitative tolerance should be greater than the defined qualitative appetite. You can define the qualitative tolerance based on the appetite scale set by the risk administrator. The default options are as follows: 1 - Averse 2 - Minimalist 3 - Cautious 4 - Open 5 - Hungry A risk administrator can change or create the risk appetite scales based on the organization's requirement. For more information, see Set up a risk appetite scale.
Quantitative tolerance	Risk tolerance in quantitative terms. The risk tolerance is the standard deviation from the defined risk appetite. The quantitative risk tolerance can be measured and expressed in monetary values. For example, an organization decides to have $15,000 (US dollars) as a target non-performing asset (NPA) for this year, which means that the organization defines $15,000 (US dollars) as the quantitative risk tolerance. The quantitative tolerance is compared with the annual loss expectancy (ALE) to compute the quantitative appetite status. Note: The quantitative tolerance should be greater than the defined quantitative appetite.
Risk appetite statement	Risk appetite statement that defines the amount and types of risk an organization is willing to accept to achieve its objectives. It documents what the organization considers as threats and its response strategies. These statements give additional context to understand the risk appetite and help the business to make risk-informed decisions. For example, "ACME Inc. has no appetite for unauthorized access to systems and confidential data and will maintain strong controls to mitigate external threats against its technology infrastructure. ACME Inc. has a low appetite for losing the continuity of business operations stemming from unreliable telecommunications or system availability. Business resiliency planning and execution must be aligned with strategic objectives. ACME Inc. has a moderate appetite for innovative technology solutions to meet user demands in a rapidly changing environment. The agency will exercise appropriate governance and discipline when considering and adopting new technology."
Risk appetite status
Qualitative appetite status	Qualitative appetite status of the risk. The qualitative appetite status is calculated by comparing the defined qualitative appetite with the qualitative appetite that is mapped to the final risk rating. A risk administrator can map the appetite scales to the risk rating criteria for the final assessment type in the Risk assessment methodology (RAM). Note: The primary RAM that is defined in the associated entity is considered for status calculation. For example, if you define the qualitative appetite as 2-Minimalist and the qualitative tolerance as 4-Open, then the following statuses appear: For a qualitative risk rating of 1- Averse or 2-Minimalist, the appetite status is within the appetite. For a qualitative risk rating of 3-Cautious or 4-Open, the appetite status is outside the appetite. For a qualitative risk rating of 5-Hungry, the appetite status is outside the tolerance.
Quantitative appetite status	Quantitative appetite status of the risk. The annual loss expectancy (ALE) values are compared with the defined quantitative appetite to calculate this appetite status. Note: The risk assessment ALE value from the primary RAM that is defined in the associated entity are considered for status calculation. For example, if you define the quantitative appetite as $1000 (US dollars) and the quantitative tolerance as $1500 (US dollars), then the following statuses appear: For ALE that is equal to or less than $1000 (US dollars), the appetite status is within the appetite. For ALE ranges from $1001 to $1500 (US dollars), the appetite status is outside the appetite. For ALE more than $1500 (US dollars), the appetite status is outside the tolerance.
Appetite status	Overall appetite status. The overall appetite status considers the worst-case scenario between the qualitative and quantitative status. For example, if the qualitative appetite status is within the appetite and the quantitative appetite status is outside the appetite, then the overall appetite status is outside the appetite.