All businesses have some appetite for risk. Risk tolerance will vary from business to business and ebb and flow with internal and external factors. Once a company has an acute understanding of the market dislocation and associated risks, the next step is to align risk tolerance with the company’s business objectives. Company culture and values, customer behaviors and long-term growth goals should all impact the company’s risk aversion and acceptance in a changing economic market. In addition to internal alignment, the company should also determine its risk appetite related to global trends and macroeconomic events as well as how competition is adjusting to emerging risks.

Likely, a new risk environment will require companies to reassess current business goals. Historically, risk assessments focus on long-term business objectives, but following a black swan event or other massive shock to the economy, risk management teams must take a closer look at short-term objectives. By looking at the near-term risk appetite, companies can react quickly to changing market dynamics.