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Wilingness to take risk (Risk apitite) in line with the theory of higher return with higher risk.
Potential /ability to take risk (Risk tolerance)
Risk appetite: is the amount of risk an entity is willing to accept in pursuit of value. It is strategic guidepost in strategy setting.
Risk Tolerance: is the acceptable level of variation relative to acheivement of specific objective, and often is best measured in the same units as those used to measure the related objective. risk tolerance is tactical.
Risk appetite is a higher level statement that considers broadly the levels of risks that management deems acceptable while risk tolerances are more narrow and set the acceptable level of variation around objectives.
To explain it simply, risk appetite is broader statement than risk tolerance. Risk tolerance is more specific.