Which term describes the act of accepting risk within defined appetite?

• A. Risk transfer
• B. Safeguard
• C. Risk acceptance
• D. Risk sharing

Answer: (C)

Accepting risk within defined appetite means deliberately tolerating a risk after evaluating its potential impact and likelihood because it falls within what the organization is willing to risk to pursue its objectives. This is risk acceptance, chosen when the cost or effort to mitigate further isn’t justified by the benefit, or when the residual risk is acceptable given strategic goals. It’s often accompanied by ongoing monitoring to ensure the risk remains within appetite.

Risk transfer moves the potential impact to another party (like insurance or outsourcing). A safeguard is a control designed to reduce risk. Risk sharing distributes risk among parties and is about spreading exposure rather than accepting it outright. These options describe reducing or shifting risk, whereas accepting risk aligns with staying within the approved risk appetite.