What is risk tolerance?

Risk tolerance — this is the degree of readiness or ability of an organization, team, or individual to accept a certain level of risk when achieving project goals.

Simply put, it is how much one can "risk" without serious negative consequences for the project or business.

For example, if risk tolerance is low, the team will avoid actions with a high degree of uncertainty and prefer a more conservative approach. If high — they are willing to take risky decisions for potentially greater benefits.

Defining risk tolerance helps to:

• Formulate risk management strategies
• Make decisions about which risks can be accepted and which cannot
• Set priorities in responding to risks

In project management, it is important to align the level of risk tolerance with all stakeholders to avoid conflicts and ensure successful project execution.