Question

Respond to the following in a minimum of 175 words:

Risk appetite is the quantity and nature of risk that organizations are willing to accept as they evaluate trade-offs between "perfect security" and unlimited accessibility. Often when a risk is examined in detail, the result or the risk appetite can result in a decision to expand their capacity to handle that risk in order to take advantage of the business opportunity, or it might result in a decision not to move forward with that opportunity.

Consider risks that exist at a typical small business. Provide an example of determining the risk appetite of the small business to a specific risk. How would you determine what to examine, what data to use in that examination, and what the risk appetite is?

Answer 1

In any business it is difficult to implement security features appropriate for the business without knowing how much risk and what kind of risk the business is ready to accept.This difficulty can be overcome by determining the risk appetite.

For determining the risk appetite of any business some steps must be followed::

1. First the business must determine what it calls a risk.

2. The business must also work out how much risk it is ready to take.

3. Business should also be able to identify what it afford loosing.

4. Assets allocated to the business should be matched to the risk appetite. ( You should never take risk where the loss is more than what you have).

Suppose the Small Business is of making food products for small children,There will always be a risk of the child chocking on the food, or eating it and having health issues which the business does not consider while determining their risk appetite and these types of things can go way beyond the risk appetite the business can handle including legal risks.

The data about the income,expenditure,financial responsibility, Insurance can help in determining the risk tolerance level of the business and along with past experience and knowledge the business owners can determine the Risk Appetite for their business.