Project Management

Project Management Central

Please login or join to subscribe to this thread

Risk appetite or Risk Statement is a function of which factors?
I want to know that risk appetite or risk statement is a function of which factors?
Sort By:
- Enterprise risk appetite/statement
- Stakeholder risk appetites
- Level of reward expected from the project
- Personal biases

Kiron
Can we further divide these factors into sub-categories?
...
1 reply by Kiron Bondale
Jul 30, 2020 6:27 PM
Kiron Bondale
...
Some yes (e.g. risk appetites for internal vs. external stakeholders) but others not.
Jul 30, 2020 3:10 PM
Replying to Sanna Ullah
...
Can we further divide these factors into sub-categories?
Some yes (e.g. risk appetites for internal vs. external stakeholders) but others not.
Is a human factor. You have three basic types of behaviours related to risk: avoid, seek, neutral. You need the three inside an organization. You will find avoid on controllers for example, You will find seek on entrepeneurs of the owners of the company for example. You will find neutral in strategics for example. The people who works on leading the company will create the balance between them.
Risk appetite is the degree of uncertainty and an entity is willing to take in anticipation of a reward. Many factors can influence risk appetite: Organizational culture, history of risk-taking, competitors, financial stability and capabilities of the organization, market maturity, market position, organization's reputation, etc.
Basically its how much risk an entity is willing to take to achieve a benefit. Typically the greater the benefit the greater the tolerance for risk or the reverse - the greater the risk the greater the need for increased benefit.

Risk being defined as the combination of probability and impact of an event.

I do not believe that risk appetite is static - its subject to change as an entity's situation evolves. If one is on-the-ropes one may take greater risks as the reward may be be all-or-nothing. Alternatively if one is comfortable one may not go as far for an incremental improvement.
...
1 reply by Sanna Ullah
Aug 03, 2020 2:27 AM
Sanna Ullah
...
I agree with you but one must consider some factors every time while deciding Risk Appetite
Aug 02, 2020 10:59 AM
Replying to Peter Rapin
...
Basically its how much risk an entity is willing to take to achieve a benefit. Typically the greater the benefit the greater the tolerance for risk or the reverse - the greater the risk the greater the need for increased benefit.

Risk being defined as the combination of probability and impact of an event.

I do not believe that risk appetite is static - its subject to change as an entity's situation evolves. If one is on-the-ropes one may take greater risks as the reward may be be all-or-nothing. Alternatively if one is comfortable one may not go as far for an incremental improvement.
I agree with you but one must consider some factors every time while deciding Risk Appetite
...
1 reply by Peter Rapin
Aug 03, 2020 8:47 AM
Peter Rapin
...
You are correct in that one has to consider factors when determining risk tolerance or appetite especially when doing it on behalf of others.

However, risk appetite is very subjective and in many cases sub conscientious. I don't know if it is entirely due to experience or if there is a hereditary or built-in predisposition. Children raised in similar circumstances, even same families, usually have different levels of risk appetite - from dare devils to over-cautious (timid).

But, when considering risk from a project perspective one has to get through the subjective preferences and try for objective. That's where process becomes critical - consider and weigh the factors.
Aug 03, 2020 2:27 AM
Replying to Sanna Ullah
...
I agree with you but one must consider some factors every time while deciding Risk Appetite
You are correct in that one has to consider factors when determining risk tolerance or appetite especially when doing it on behalf of others.

However, risk appetite is very subjective and in many cases sub conscientious. I don't know if it is entirely due to experience or if there is a hereditary or built-in predisposition. Children raised in similar circumstances, even same families, usually have different levels of risk appetite - from dare devils to over-cautious (timid).

But, when considering risk from a project perspective one has to get through the subjective preferences and try for objective. That's where process becomes critical - consider and weigh the factors.

Please login or join to reply

Content ID:
ADVERTISEMENTS

"Outside of a dog, a book is a man's best friend. Inside of a dog, it's too dark to read."

- Groucho Marx

ADVERTISEMENT

Sponsors