---
title: [OR] [P1] [S4] Confirm Risk Appetite in Operational Resilience
description: [Plan] Confirm Risk Appetite in Operational Resilience?
image: https://blog.bcm-institute.org/hubfs/Operational%20Resilience%20OR/OR%20Diagram/OR%20Roadmap%20Diagram/Updated%20OR%20PM%20Diagram/OR%20PM%20%5B1%5D_Confirm%20Risk%20Appetite.png
---
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###### Operational Resilience Planning Methodology "What Is? How To?" Series
# \[OR\] \[P1\] \[S4\] Confirm Risk Appetite in Operational Resilience
[![\[E2\] \[C6\] \[P1\] \[S4\] Confirming Risk Appetite](https://no-cache.hubspot.com/cta/default/3893111/36bc08e8-54f0-4b0b-b402-6d96c72dc3bb.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/36bc08e8-54f0-4b0b-b402-6d96c72dc3bb)[![\[OR\] \[BoK 4\] \[What Is\] Confirm Risk Appetite](https://no-cache.hubspot.com/cta/default/3893111/11d85b0b-8182-4a93-96d9-0751a4bf2787.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/11d85b0b-8182-4a93-96d9-0751a4bf2787)[](https://cta-redirect.hubspot.com/cta/redirect/3893111/162f5e82-f0de-4337-aaf6-be7477b24463)Risk appetite is the amount of risk, on a broad level, an organisation is willing to accept in pursuit of value.
The scope is further enlarged when viewed from an operational resilience perspective.
Risk appetite reflects the organisation’s risk management philosophy and influences its culture and operating style.
This blog \[OR-P1-S4\] elaborates on the content for Stage 4 of the "PLAN" phase or P1 of the OR Planning Methodology.
Course Participants: This blog is a pre-reading for the Operational Resilience Expert Implementer course participants.
Certification Application: The "How To" section is designed to assist successful participants in completing their Certification Application Form or CAF.
[![\[OR\] \[Full Banner\] \[M3\] Pre reading for Participants](https://no-cache.hubspot.com/cta/default/3893111/b012356f-2331-4994-b657-ad92b84522cb.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/b012356f-2331-4994-b657-ad92b84522cb)
[Moh Heng Goh](https://blog.bcm-institute.org/operational-resilience/author/moh-heng-goh) Apr 6, 2023
###### Operational Resilience Certified Planner-Specialist-Expert
### [![\[E2\] \[C6\] \[P1\] \[S4\] Confirming Risk Appetite](https://no-cache.hubspot.com/cta/default/3893111/36bc08e8-54f0-4b0b-b402-6d96c72dc3bb.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/36bc08e8-54f0-4b0b-b402-6d96c72dc3bb)[![\[OR\] \[Banner\] \[What Is\] \[P1\] \[S4\] Confirm Risk Appetite](https://no-cache.hubspot.com/cta/default/3893111/1d8cf515-6bf2-464d-a7ed-b88622cedeed.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/1d8cf515-6bf2-464d-a7ed-b88622cedeed)What is Confirm Risk Appetite?
[![\[OR\] \[BoK 4\] \[What Is\] Confirm Risk Appetite](https://no-cache.hubspot.com/cta/default/3893111/11d85b0b-8182-4a93-96d9-0751a4bf2787.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/11d85b0b-8182-4a93-96d9-0751a4bf2787) Risk Appetite is the level of risk an organisation is willing to accept in pursuit of value.
The scope is further enlarged when viewed from an operational resilience perspective.
It reflects the organisation’s risk management philosophy and influences its culture and operating style.
Many organisations assess risk appetite qualitatively, using categories such as high, medium, or low, while others take a quantitative approach that reflects and balances growth, return, and risk goals.
#### Treat Risk Appetite as Strategic
[](https://cta-redirect.hubspot.com/cta/redirect/3893111/75653343-ef0d-4799-83cc-96914a06ca14)According to COSO, it is a “guidepost” in strategy-setting.
The organisation’s business model provides essential context for assessing risk appetite by clarifying its activities, customers, products, and the markets in which it conducts business.
A thorough understanding of an organisation’s business objectives, strategy and operations is beneficial when articulating the risks it chooses to accept and those it chooses to avoid, as it creates value.
As the organisation executes its operational resilience strategy, it develops and increases its exposure to uncertainty.
Therefore, business objectives and strategies provide the context for understanding the risks the enterprise chooses to undertake.
Risk appetite can also set boundaries around opportunity-seeking behaviour, which impacts the entity’s objectives and strategies.
### [![\[OR\] \[Banner\] \[How to\] \[P1\] \[S4\] Confirm Risk Appetite](https://no-cache.hubspot.com/cta/default/3893111/042295e8-c423-40ee-acb2-6625479beec8.png)](https://cta-redirect.hubspot.com/cta/redirect/3893111/042295e8-c423-40ee-acb2-6625479beec8)
### How to Confirm Risk Appetite?
[](https://cta-redirect.hubspot.com/cta/redirect/3893111/162f5e82-f0de-4337-aaf6-be7477b24463)This step is to confirm the organisation's risk appetite concerning operational resilience. This involves:
#### Conduct Risk Assessment
Conduct a comprehensive risk assessment to identify and assess potential threats and vulnerabilities that could impact the organisation's operations.
Consider internal and external factors, such as cyber threats, natural disasters, supply chain disruptions, and regulatory changes.
#### Quantify Risk Tolerance
[](https://cta-redirect.hubspot.com/cta/redirect/3893111/d93555a0-2624-4411-99e1-84ec7cfaa225)Quantify the organisation's risk tolerance by evaluating the potential impact and likelihood of different operational disruptions.
This will help determine the acceptable level of risk exposure and inform decision-making regarding risk mitigation measures.
#### Define Risk Appetite Statement
[](https://cta-redirect.hubspot.com/cta/redirect/3893111/1b620a23-ced7-40ac-a175-b9d412cf8f3a)Develop a risk appetite statement articulating the organisation's tolerance for operational disruptions.
This statement should align with the overall risk appetite framework and guide decision-makers in evaluating and managing operational risks.
##### [](https://cta-redirect.hubspot.com/cta/redirect/3893111/03e3e5c5-5fae-4b56-9821-8fbd1a1b4725)
| | **Definition** | **Explanation** | **Definition** | |
| --- | --- | --- | --- | --- |
| | **Risk Appetite** | is strategic and approved by the board; is the threshold assigned to each business & functional entity agreed upon and approved by the management is limited and transactional, with monitoring responsibilities for each business & functional entity running from the bottom upwards. has a direct correlation to risk capital allocation is a qualitative measure. | [](https://cta-redirect.hubspot.com/cta/redirect/3893111/1b620a23-ced7-40ac-a175-b9d412cf8f3a) | |
| | **Risk Threshold** | is the maximum amount of risk that an organisation is willing to take or withstand is a quantitative one. | [](https://cta-redirect.hubspot.com/cta/redirect/3893111/83e24197-de5f-4a79-b8b7-73d9d5c58b12) | |
| | **Risk Tolerance** | may be reflected differently across objectives, including earnings variability, interest rate exposure, compliance with laws and regulations, and the acquisition, development, and retention of people. relate to all of these objectives are expressed differently. | ** [](https://cta-redirect.hubspot.com/cta/redirect/3893111/d93555a0-2624-4411-99e1-84ec7cfaa225)** | |
| | **Confirming Risk Appetite** | This blog discusses how management can carry out these activities and outlines steps to confirm the risk appetite for operational resilience. | **[](https://cta-redirect.hubspot.com/cta/redirect/3893111/0bbba9e2-d8f3-4406-8a30-9f94cda9ad99)** | |
| | | | | |
#### "Plan" Phase of the OR Roadmap
| **Assess Capability and Maturity** | **Analyse Gap** | **Develop Strategy and Roadmap** | **Confirm Risk Appetite** | **Develop and Embed Governance** | |
| --- | --- | --- | --- | --- | --- |
| [](https://cta-redirect.hubspot.com/cta/redirect/3893111/a5acb961-f2ec-4567-b636-874e365c892e) | [](https://cta-redirect.hubspot.com/cta/redirect/3893111/48ad32d4-5765-4202-bcfd-4842c25cb2e2) | [](https://cta-redirect.hubspot.com/cta/redirect/3893111/891c6c74-ae2a-4b88-8389-9bd88e49e284) | [](https://cta-redirect.hubspot.com/cta/redirect/3893111/75653343-ef0d-4799-83cc-96914a06ca14) | [](https://cta-redirect.hubspot.com/cta/redirect/3893111/7cf54cf9-f96e-45a7-aa4c-0ae5c3c9a24a) | |
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