Risk appetite is the amount and type of risks that an organization is willing to accept while pursuing its objectives. And, risk tolerance specifies how much loss an organization is willing to accept given the existing assets and other risks of the company. Though risk appetite and risk tolerance sound similar, they are not the same.

Risk appetite specifies the desired level of risk an organization is prepared to accept in pursuit of its mission. It is the general level of risks an organization is willing to accept. For example, a company may not be willing to accept risks that impact the revenue growth of the company significantly. This is the risk appetite of the organization.