Risk Appetite, Tolerance, Capacity and Limits

Submitted on 27th May 2019

One of the most challenging parts of ORSA is trying to understand the differences between risk appetite, risk tolerance and risk limits. Some of the resources talk about capacity in these terms as well. This paper attempts to define these terms consistently. This is an area that does not always align with what you expect going in, and not all of the sources use exactly the same definition. It is also evolving over time, so the dates of documents can be important.

Length of Resource
9 pages
Author
Max J. Rudolph, FSA CFA CERA
Date Published
Publication Type
article
Resource Type
commercial