Definition:
Risk Threshold refers to the specific point at which a risk becomes unacceptable, requiring immediate action. It defines the maximum level of risk exposure an organization or project team is willing to tolerate before implementing risk response strategies. Risk thresholds are quantifiable and help in decision-making by setting clear boundaries for acceptable risk levels.
For example, in a financial investment project, a company may set a risk threshold of a 10% potential loss. If market fluctuations indicate a loss beyond this level, corrective actions such as portfolio diversification or hedging are triggered.
