Risk appetite is the amount and type of risk that an organization is willing to accept in pursuit of its objectives. One of the elements of risk appetite is the enterprise’s capacity to absorb loss, which is the maximum amount of loss that an organization can withstand without jeopardizing its existence or strategic objectives. The effectiveness of compensating controls, the residual risk affected by preventive controls, and the amount of inherent risk considered appropriate are not elements of risk appetite, but rather factors that influence the risk assessment and responseprocesses. References = [CRISC Review Manual (Digital Version)], page 41; CRISC Review Questions, Answers & Explanations Database, question 196.