Which of the following best describes the goal of risk limits?

The goal of risk limits is to control the level of risk exposure that an organization or portfolio is willing to take on. By defining specific thresholds for various types of risk, such as credit risk, market risk, or operational risk, organizations can manage and mitigate potential losses effectively. Establishing risk limits helps ensure that the risk taken aligns with the organization's risk appetite and regulatory requirements.

Controlling risk exposure is crucial in maintaining the overall stability and integrity of a financial institution, as unchecked risks can lead to significant financial distress or failure. By setting these limits, organizations can enhance decision-making processes and avoid taking excessive risks that could jeopardize their financial health.

Other options, such as maximizing the number of investments or increasing overall market risk, would actually contradict the purpose of risk management, which is to manage and limit risks rather than to amplify them. Facilitating employee performance evaluation, while important, is not the primary focus of risk limits; rather, it is a secondary consideration that might arise from having a clearer risk governance structure in place.