A Risk Appetite Framework establishes the processes, governance, and documentation through which an organization articulates its risk appetite, translates it into quantitative and qualitative limits, and monitors adherence across business units. It typically includes risk appetite statements, metrics, thresholds, escalation protocols, and periodic review cycles. Financial institutions use frameworks that cascade enterprise-level risk appetite into trading limits, credit concentration caps, and operational loss tolerances. The framework must align with strategic planning, capital allocation, and performance management systems to remain effective.