---
title: Risk appetite and tolerance in Advanced Risk
description: You can define a risk appetite and tolerance within your organization by using the Advanced Risk application. A risk appetite and tolerance enable your organization to define the boundaries for acceptable and unacceptable risks.
locale: en-US
canonical_url: https://www.servicenow.com/docs/r/australia/governance-risk-compliance/grc-risk-management-workspace/risk-appetite-tolerance.html
release: australia
product: GRC: Risk Management Workspace
classification: grc-risk-management-workspace
topic_type: concept
last_updated: "2026-03-12"
reading_time_minutes: 1
breadcrumb: [Advanced Risk Assessment, Explore, Risk Management, Governance, Risk, and Compliance]
---

# Risk appetite and tolerance in Advanced Risk

You can define a risk appetite and tolerance within your organization by using the Advanced Risk application. A risk appetite and tolerance enable your organization to define the boundaries for acceptable and unacceptable risks.

## Overview of a risk appetite

A risk appetite is the amount of risk that an organization is willing to take to achieve its strategic objectives.

A risk appetite can be defined in qualitative \(numerical scale and ratings\) and quantitative \(absolute dollar\) terms. For example, let's say that a lending institution provides a loan to some small scale industries. The lending institution has defined 5 percent as their target non-performing asset \(NPA\) for the current fiscal year.

**Note:** A non-performing asset \(NPA\) is a loan or advance for which the principal or interest payment remained overdue.

Therefore, the risk appetite of the institution is 5 percent.

## Benefits of using a risk appetite

The benefits of having a risk appetite for your organization are as follows:

-   Provide better guidance to your first line of employees to implement risk management in specific areas of your business.
-   Take risks within your organizational expectations and define and manage actions when there’s a breach.
-   Assess the risk status that is based on the defined risk appetite and prioritize the risks that require attention.
-   Assess all possible risks and define the boundaries for acceptable and unacceptable risks.
-   Monitor your risk exposure and ensure that it’s consistent with your risk appetite. You can also track any unacceptable risks.
-   Initiate a risk mitigation plan based on the risk appetite status.

## Overview of risk tolerances

A risk tolerance is the standard deviation from the defined risk appetite that an organization can withstand without risking the organization's objectives and goals.

## Setting up a risk appetite and tolerance

A risk administrator can configure and set up a risk appetite for your organization in the Advanced Risk application. For more information, see [Risk appetite setup](https://raw.githubusercontent.com/ServiceNow/ServiceNowDocs/australia/markdown/australia/governance-risk-compliance/grc-risk-management-workspace/risk-appetite-setup.md).

**Parent Topic:**[Advanced Risk Assessment](https://raw.githubusercontent.com/ServiceNow/ServiceNowDocs/australia/markdown/australia/governance-risk-compliance/grc-risk-management-workspace/advanced-risk-assessment.md)