Hera Limited (Hera), specializing in the production of high-end audio-visual equipment, has enjoyed a period of strong growth in sales and profits. The board of directors will soon consider a proposal from the executive committee to invest in a project to build a production facility in Myanmar for the manufacture of smart phones in order to diversify the company's business. Hera would require substantial new capital for the investment, which it would obtain from a new share issue and/or bank borrowings. The audit committee has been asked by the board to evaluate and determine the nature and extent of the risks the company is ready to take in pursuit of this new strategic initiative.

REQUIRED

Discuss the board's responsibility for deciding Hera's risk appetite and risk tolerance.