Which term represents the level of risk that management is willing to tolerate in pursuit of objectives?

Which term represents the level of risk that management is willing to tolerate in pursuit of objectives?

• A. Risk governance
• B. Risk tolerance
• C. Asset
• D. Risk scope

Answer: (B)

Risk tolerance is the level of risk management is willing to tolerate in pursuit of objectives. It turns the broader willingness to take on risk (risk appetite) into concrete, objective-specific boundaries. By setting tolerances, an organization defines how much deviation from targets is acceptable and when action should be taken. For instance, if an objective aims for 99.9% system uptime, a tolerance might allow only 0.1% downtime before corrective measures are triggered. This concept guides how controls are designed and how decisions are made when risk signals arise.

Risk governance refers to the structures and processes that provide oversight and accountability for risk management. An asset is a valuable resource the organization seeks to protect. Risk scope defines which risks and areas are included in the assessment.