Risk tolerance
Risk tolerance specifies acceptable variation or exposure around an objective or risk criterion. It helps translate broad risk appetite into practical boundaries for decisions and escalation. Organisations use the terminology differently, so an answer should make its intended meaning clear and follow any definitions supplied in the scenario.
Worked example
A delivery business aims for at least 98% on-time deliveries and sets an escalation threshold when performance drops below 96%. The threshold operationalises a tolerance around its service objective; management still investigates serious individual incidents.
Common mistake
Assuming any result within a tolerance is harmless or that a tolerance overrides legal and safety requirements.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBL | Supporting | September 2026–June 2027 |