Which term is defined as "the amount and type of risk that an organization is prepared to pursue to achieve its strategic objectives?"

The term that is defined as "the amount and type of risk that an organization is prepared to pursue to achieve its strategic objectives" is known as risk appetite. This concept reflects an organization's willingness to engage in risk-taking as part of its overall strategy. It is crucial because it helps guide decision-making and resource allocation in alignment with the organization's goals.

Risk appetite is typically shaped by various factors, including the organization's overall strategy, market conditions, and stakeholder expectations. By clearly understanding and defining their risk appetite, organizations can balance the pursuit of opportunities against the potential downsides, ensuring that risk-taking aligns with their strategic objectives.

In contrast, risk tolerance refers to the specific level of risk that an organization can accept on a more granular level, often relating to individual projects or decisions. Risk capacity denotes the maximum amount of risk that an organization can bear based on its financial and operational capabilities. Risk profile, on the other hand, is a broader term that encompasses an organization’s overall exposure to risk across various dimensions but does not specifically indicate willingness like risk appetite does.