CAPM (Certified Associate in Project Management) Practice Exam

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What is risk appetite?

  1. Measures at which a stakeholder has a specific interest

  2. Degree of uncertainty an entity is willing to take on

  3. Degree of risk that can be tolerated

  4. Risk that cannot be eliminated

The correct answer is: Degree of uncertainty an entity is willing to take on

Risk appetite refers to the degree of uncertainty or the amount of risk that an organization or individual is willing to accept in pursuit of their objectives. It reflects the level of risk-taking that an entity is comfortable with and is a key factor in decision-making processes related to managing risks within a project or organization. This concept is crucial in determining the boundaries within which risks can be accepted and managed effectively. The other options are not accurate definitions of risk appetite. Option A refers to a stakeholder's specific interest, while option C mentions the degree of risk that can be tolerated, and option D describes risk that cannot be eliminated. While these concepts are related to risk management, they do not directly define what risk appetite is.

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