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Risk Assessment is a process that provides the required information to decision makers on the uncertainties in relation to specific goals or objectives. Conducting risk assessments helps organizations in managing uncertainties. Typically risk assessment process consists of two key tasks. First, to identify risks and second, to analyze the identified risks.

The effect of risk can be either positive or negative. The negative effect comes from not meeting goals or objectives. The positive effect comes from meeting or exceeding set goals.

Key goal of risk assessment is to inform management at all levels of the risks faced by the organization and how those risks affect the organization's ability to meet objectives, as well as to identify potential risk treatment options.

When assessing risks, the risk manager should be mindful of overall risk appetite and risk tolerance.

Risk Appetite is defined as the total exposed amount that an organization wishes to undertake on the basis of risk-return trade-offs for one or more desired and expected outcomes.

Risk Tolerance is defined as the amount of uncertainty an organization is prepared to accept in total or, more narrowly, within a certain business unit or particular risk category, or for a specific initiative.

Learn more about ARM Training program at https://ermgovernance.com/ARM


Ref:
www.ermgovernance.com
https://ermgovernance.com/ARM
https://ermgovernance.com/Resources/RIMS_Exploring_Risk_Appetite_Risk_Tolerance_0412.pdf
https://ermgovernance.com/Resources/Exploring%20Risk%20Tolerance%20and%20Risk%20Appetite.pdf
https://www.fairinstitute.org/blog/risk-appetite-vs.-risk-tolerance.-whats-the-difference
https://www.logicmanager.com/erm-software/knowledge-center/best-practice-articles/risk-appetite-risk-tolerance-residual-risk/


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