10.3. Risk tolerance and capacity

Question 1

What is meant by risk tolerance?

Answer 1

A limit, usually applied to downside risks, setting the level of risk that will be tolerated. e.g. for health and safety, minor incidents such as cuts may be acceptable but not death.

Question 2

How are risk tolerances usually expressed?

Answer 2

As RAG ratings (with red being unnacceptable)

Question 3

What is risk capacity?

Answer 3

The maximum level of enterprise-wide risk to which an organisation may be exposed.

Question 4

Risk capacity is usually a function of an organisation’s f________ s_______.

Answer 4

financial strength