Risk appetite can be interpreted as reflecting the setting of targets and limits across the organisation as a whole, plus the breakdown of these high-level statements into more detailed risk tolerances. [Source: Institute and Faculty of Actuaries (IFoA) Enterprise Risk Management Specialist Principles (SP9) Core Reading]
It is the level of aggregate risk that a company can undertake and successfully manage over an extended period of time (Tavan). The capacity for undertaking risk will vary by company and depend on circumstances unique to the company. To determine its capacity, a company will need to initially establish a set of corporate objectives, e.g., minimum surplus ratio, industry rating. Ultimately, a company will need to develop corresponding risk-management strategies to successfully manage its risks. [Source: Society of Actuaries (SOA) Enterprise Risk Management Specialty Guide]
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