Risk tolerance is the level of residual risk that an organization and its stakeholders are willing to bear within a given strategic context. Without clearly defining an organization’s risk appetite and risk tolerance levels, this could pose a risk to the organization.
Boards should be aware of any emerging and collateral risks that affect a company’s strategy or their risk profile. An ongoing dialogue with the management team is critical to help ensure that the company’s strategy remains appropriate given the market conditions and economic situation.
