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Unraveling risk appetite

Publication of Business Innovation
A.F. Wild,de | Doctoral thesis | Publication date: 10 January 2013
One of the most difficult choices that organizations face is the choice to spend resources today to reduce the probability or negative impact of events that may happen tomorrow. In hindsight, it seems to be a waste to spend organizational resources on reducing the risk of low probability events that up to now never did materialize. Intuitively it appears much more prudent for an organization to spend resources on events that have a higher frequency of occurrence and for which it is easier to assess that resources have been well spent. But what if the consequences of the low probability events are catastrophic and threaten business continuity? Should the leadership of an organization be gambling on a catastrophic low probability event not to occur?

Author(s) - affiliated with Rotterdam University of Applied Sciences

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