What is "risk tolerance"

n. 1 Risk tolerance is a more specific measure of the degree of uncertainty that an investor is willing to accept in respect of negative changes to its business or assets, as opposed to risk appetite being a broad-based level. ''(Generic)'' 2 The acceptable level of variation relative to the achievement of objectives. In setting specific risk tolerances, management considers the relative importance of related objectives and aligns risk tolerances with its risk appetite. ''(COSO)''