Risk Appetite vs Risk Tolerance | Grit in the Boardroom

This episode discusses risk appetite and risk tolerance, focusing on their definitions and implications in business contexts. Key topics include the difference between risk events and consequences, as well as the concept of combinatorial risk.

The conversation highlights how risk appetite refers to the level of risk an individual or organization is willing to take, while risk tolerance is about the capacity to endure that risk if it occurs. The discussion emphasizes that understanding consequences is crucial when evaluating risk.

Examples such as airline accidents illustrate that failures are rarely due to a single cause; instead, they often result from multiple factors interacting. This perspective encourages listeners to rethink how they approach risk management.