easy · FRM Part 1
How is 'Risk Capacity' distinguished from 'Risk Appetite' in a standard risk governance framework?
- Risk capacity is an operational limit, while risk appetite is a 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 chooses to take, while appetite is the absolute maximum it can survive.
- There is no distinction; the terms are used interchangeably in modern governance.
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