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The chapter details how understanding an organization’s risk appetite and tolerance is vital for making informed IT sourcing decisions. It provides an approach for defining risk levels, aligning IT sourcing strategies with these levels, and communicating them effectively to all stakeholders. It further emphasizes the need for regular review and adjustments based on changing circumstances. Additionally, the chapter provides a comprehensive guide on how to align IT sourcing decisions with risk appetite, stressing the importance of integrating risk management into the IT sourcing process, prioritizing sourcing decisions based on risk, and promoting a culture of risk awareness. It argues that such alignment can contribute to better risk management and ensure the long-term success of IT sourcing initiatives.