Define the degree of risk the organization will accept to achieve its goals is the correct option.

A risk appetite statement is a high level governance statement that sets how much risk the board and senior leaders are willing to accept as they pursue strategy and objectives. It guides decision making and risk taking across the organization and helps align risk exposures with the organization strategy.

While the statement informs limits and reporting needs it is not itself the detailed implementation of those limits. It provides the overarching judgment about acceptable risk rather than the operational rules used to apply that judgment.

Set thresholds and escalation rules for risk reporting across business units is incorrect because that choice describes operational thresholds and escalation procedures. Those items are implementation details that flow from the risk appetite but they are not the primary purpose of the appetite statement.

Demonstrate adherence to applicable laws and industry regulations is incorrect because demonstrating compliance is an outcome and a constraint on activity. A risk appetite does not prove legal or regulatory adherence and compliance is addressed through policies, controls, and assurance processes.

Document a complete inventory of identified risks and their possible consequences is incorrect because that describes a risk register or risk inventory. A risk appetite is a policy level statement about acceptable risk levels and not a catalog of specific risks and impacts.

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