Introduction
In today’s fast-moving technology environment, business owners and leaders often have to make decisions without complete information and guaranteed outcomes. Nowadays, teams within an organisation throw the term “risk appetite” around without truly understanding the meaning behind it.
This guide is for existing and emerging leaders who want practical, no-fluff advice on how to create a Risk Appetite Statement (RAS) and leverage it to drive confident, aligned decision-making.
What is a Risk Appetite Statement?
A Risk Appetite Statement is your organisation’s official position on how much risk it is willing to take to achieve its goals.
Think of it like defining your company’s risk personality, or “risk meter”:
How would you describe your approach to handling customer data – more cautious or more proactive? Does your organisation take a minimal approach to collecting customer data or do you collect more than is strictly necessary?
- For example, do you collect as much as possible ‘just in case’ it might come in handy for future products and service offerings?
Do you adopt an iterative approach when launching new Products or features?
- For example, are you open to making adjustments during development, even if it yields short-term, undesired impact?
What is your organisation’s tolerance for outages, compliance breaches, or financial loss?
In practical terms:
- Outages: Are you prepared to experience up to X number of outages in a year? What level of disruption impacts your ability to meet business objectives?
- Compliance: Can you absorb X number of compliance breaches in a year without derailing the company’s strategic goals? Or would that pose a significant threat to operations?
- Financial Loss: What threshold defines a ‘tolerable’ financial loss? Is there a specific amount the business is willing to overlook before it becomes a critical issue?
Without this clarity, teams often operate inconsistently, and that’s where trouble begins.
Why It Matters for You as a Risk Officer
Making decisions without understanding how much risk the business is willing to accept is a common error in leaders’ day-to-day operations. We’ve all heard the phrase, “no risk, no reward”, but decision-making becomes far more effective when there’s clarity on acceptable risk levels. That’s exactly what a Risk Appetite Statement provides: a clear framework to guide informed, confident choices. It gives teams the confidence to act, reduces unnecessary escalations, and ensures everyone is aligned on the boundaries for an appropriate level of risk to take. Imagine you’re about to start operations in a French-speaking jurisdiction, yet no one in the company speaks French. Your ability to calculate the risk behind such a strategic decision will depend on a variety of factors. Assuming the industry is hardly regulated, and you work with local partners who will directly liaise with the francophone audience, your risk appetite is low. However, assuming the business operates in a heavily regulated industry, requiring direct interaction with various regulators, and an on-site presence, your risk appetite will be considerably higher. So instead of slowing things down, a Risk Appetite Statement (“RAS”) helps drive smarter, faster, and more accountable decision-making, while reinforcing trust throughout the organisation.
An RAS helps organisations:
- Align everyday actions with strategic goals
- Empower product and engineering teams to move faster and with fewer blockers
- Satisfy regulators and board expectations
- Avoid triggering “reactive mode” when things go wrong
Step-by-Step Guide to Building a Risk Appetite Statement
1. Start With Your Strategic Goals
Every effective Risk Appetite Statement begins with a clear understanding of your organisation’s strategic goals. Whether you’re expanding into new markets, launching innovative products, maintaining regulatory licenses, or simply improving customer trust, your appetite for risk should reflect those ambitions. It’s not just about defining what you won’t tolerate – it’s about aligning risk-taking with what matters most to the business. By anchoring your appetite in strategy, you ensure that risk decisions support growth, innovation, and resilience, rather than hinder them.
Example:
CollabSuite is a SaaS company known for its workplace collaboration tools. One of its annual strategic goals is to introduce AI-powered features which includes real-time transcription and smart meeting summaries across all enterprise accounts by the end of the quarter.
To enable rapid innovation, CollabSuite adopts a moderate appetite for model performance risk, accepting that some AI features may not be perfect at launch. However, they set a low-risk appetite for data privacy, ensuring that all AI models meet strict internal privacy standards and avoid storing user conversations beyond what’s necessary.
This balance allows the company to stay ahead in the market while reinforcing its brand promise around user trust. Without a clear risk appetite aligned to their AI roadmap, they risk either moving too slowly, or too recklessly. Strategic alignment keeps innovation responsible, accountable and intentional.
2. Identify Your Key Risk Areas
Before setting your risk appetite, it’s important to understand your current risk landscape. Consider real business data and events that affect the broader industry; examples include: past incidents, audit findings, customer complaints, near misses, regulatory changes, new legislation, and operational bottlenecks. These insights reveal where risks are already materialising and help you avoid setting risk thresholds in a vacuum. A clear view of your current exposure ensures your Risk Appetite Statement is grounded in reality, not assumptions, making it more credible and useful across the business.
Example:
DataBridge is a company that manages customer analytics for retail clients. Some Key Risk Indicators (KRIs) with DataBridge include:
- A near miss involving an unsecure API that briefly exposed customer email addresses
- A delayed response to a Data Subject Access Request (DSAR), breaching GDPR response timelines
3. Assess Your Current Exposure
Always ensure that your risk identification is valid. For early-stage organisations and SMEs, a qualitative approach is recommended due to the ease of assessment: categorise the risks as low, medium or high. Now let’s apply the approach to the above example of DataBridge.
First, a security review uncovered an unsecure API that briefly exposed customer emails. While no breach occurred, it signals a high exposure in information security, warranting a very low appetite for security control failures.
Secondly, the review also revealed that requests from data subjects to delete data are sometimes not treated within the organisation’s specified Service Level Agreement.
Lastly, a delayed DSR response led to a minor GDPR breach – evidence of moderate to high compliance risk, reinforcing the need for a low appetite for regulatory gaps. A Risk Appetite built on assumptions is risky business. However, Risk Appetite built on real data and events has a strategic advantage. By grounding its RAS in real events, DataBridge can balance growth with consumer trust and compliance.
4. Define Appetite Levels for Each Risk Area
Use simple, relatable language and tie it to practical thresholds.
| Risk Area | Appetite Level | Real-World Expression |
| Cybersecurity | Low | Zero breaches in one year (i.e. “Zero target’) |
| Operational Risk | Medium | 100 % data deletion response within specified time |
| Compliance | Low | Zero regulatory breach annually |
5. Keep It Short and Simple
- Your RAS should be 1 – 2 pages, maximum
- Share in the organisation’s teams pages so it is accessible to all employees e.g. Confluence, Notion, or your company Intranet
- The more accessible it is, the more useful it becomes
6. Embed Into Daily Workflows
A Risk Appetite Statement is only valuable if actively used in everyday decision-making. It should become a natural checkpoint in product planning, investment discussions, incident reviews, and policy development. When teams regularly ask, “Does this align with our risk appetite?” It encourages proactive thinking and prevents avoidable missteps. Embedding RAS into templates, approval processes, and team activities can also help drive business decisions. Some examples of where a RAS would provide value-add are listed below:
- New product approvals
- Risk assessments
- Incident postmortems
- Leadership onboarding
Ask in meetings: “Does this align with our risk appetite?”. If the answer is “no” – that’s a decision-making moment.
Please note, the above examples were for illustrative purposes only, and should not be adopted as a copy-paste RAS.
Illustrative Example
Imagine your company is launching a Buy Now, Pay Later (BNPL) product in a new market.
Everyone’s excited, but the Legal Team flags a possible regulatory concern. E.g., Not having the right license. Engineering worries about system strain. The Business wants the product to go live now.
With a Risk Appetite Statement in hand, you can quickly align on the following:
- What level of regulatory risk are we willing to accept? E.g. Zero regulatory – a single regulatory concern can shut down the business from loss of funds
- What’s our operational risk threshold for downtime? E.g. No more than two downtimes per year
- How much financial exposure is acceptable from loan defaults? E.g. The business is not willing to incur more than one million dollars in financial losses
No more debating from gut feelings or guesses, stakeholders are now aligned on shared boundaries and what an appropriate level of risk to take looks like.
Final Takeaway
Crafting a Risk Appetite Statement may seem like a regulatory checkbox or an executive-only task, but it’s much more than that, especially in fast-paced, innovate-first, tech companies.
When executed well, an RAS acts as a decision compass by helping teams confidently say “yes”, “no”, or “not yet” when faced with uncertainty. It’s not about avoiding all risks; it’s about choosing your risks wisely and making sure key stakeholders are clear on what’s acceptable and what’s not.
A strong RAS gives you the power to be bold when needed, cautious when required, and always accountable. It helps your company with:
- Clear decision-making frameworks
- Alignment between strategy and risks
- Early warning signals and better escalation
- Unified culture accountability
- Heightened confidence in regulatory compliance
Last but not least, stay in control, especially when it matters most.
If you’re interested in developing and implementing a successful Risk Appetite Statement, feel free to reach out to the team at T.A.A.S – we’re here to guide you through the process.