easy · FRM Part 1 Foundations of Risk Management
How is 'Risk Capacity' distinguished from 'Risk Appetite' in a standard risk governance framework?
- Risk capacity is merely an internal operational limit, while risk appetite is a hard regulatory minimum.
- Capacity represents a hard ceiling based on resources, while appetite is a lower, deliberate choice for strategic pursuit.
- Capacity is the amount of risk a firm actively chooses to take on, while appetite is the absolute maximum it could ever survive.
- There is no real distinction between the two; the terms are used completely interchangeably in modern governance frameworks.
Sign up free to see the explanation and track your rank →
More FRM Part 1 Foundations of Risk Management practice
- In the context of the CAPM, what is the definition of 'Alpha' (α)?
- What is the calculated Sortino Ratio?
- If two portfolios have the same Sharpe ratio but one has positive skewness and the other h
- If the correlation between the portfolio and the new asset is 0.0, and the manager allocat
- What is its approximate yield to maturity (YTM)?
- The BCBS 239 principle of 'Timeliness' suggests that risk reporting should be more frequen
- An investor adds a momentum factor (WML) to a Fama-French three-factor model. This new mod
- In a 'Liquidity Spiral', what is the primary channel by which market liquidity risk and fu