Project Management Knowledge

Risk Appetite

Every project comes with different kinds of risks. In project management, risks are defined as uncertain events that may affect the project objectives, scope, cost, schedule, and quality. Many organizations view risks as the influence of uncertainty on the organizational and project objectives. There are varying degrees of risks, and how it affects the project depends on the risk attitude of the organizations. There are different factors that influence the risk attitude of the stakeholders and organizations and one of them is the risk appetite.

The risk appetite, in project management, is the level of uncertainty an organization or stakeholder is willing to take on with the anticipation of reward at the end. The risk appetite of an organization indicates how much it is willing to take risks to grow itself. Moreover, it also refers to the amount of risk that organizations and stakeholders want to accept in order to attain its objectives.

There are some organizations that are willing to take a lot of risks especially if the rewards are high thus a high-risk appetite, but some want to play it safe and just go conservatively thus a low-risk appetite.

This term is defined in the 5th edition of the PMBOK.

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