Question

Define each of the following, and indicate the hierarchy in which they occur:
Risk tolerance, Risk universe and Risk appetite and Risk capacity?

Answer 1

Risk tolerance -

  The investing terminology "risk tolerance" relates to the amount of market risk, such as the volatility, or market ups and downs, an investor can tolerate. Usually gauged by a calculator or questionnaire, financial planners often use risk tolerance to categorize investors and investing styles as aggressive, moderate or conservative. That happen in share markets...

Risk universe

The risk universe is the list of risks the company faces or might face, coupled with a description of their severity and frequency, along with the decision as to what the company wants to do with such risk.It is used as guideline for people managing the risk day in – day out. As said, as time changes, it needs a regular revision based on the input of the day-to-day situations and the management, as the latter decides upon the risk, risk universe is occur in finance(shares, money etc), it, can be occur in employment, management

Risk appetite

Risk appetite is a concept that helps guide organizational risk management activities by allowing officials to establish a baseline level of risk an organization is prepared to accept before taking an action, as well as evaluate the likelihood and impact of certain threats..

risk tolerance definition, it’s important to keep in mind that risk tolerances should be specific to a company’s individual goals and require actionable parameters.

For example, in rakesh sharma unified root-cause risk library, every risk factor can be given a risk tolerance, or a range of acceptability to the organization.

Risk capacity

Risk capacity is not based on your feelings about risk. It’s not even based on any specific investment. Instead, it relates to how much risk you can afford to take. And that has to do with your financial situation, as well as your age and the time you have to invest. Risk capacity is we can feel not only in share market but also real life situation as well.