Every business or any other venture always carries with it some risk that can affect your finances and your reputation. Every organization has to decide on the type and amount of risk it can take while conducting business.
Risk criteria can come from uncertainties that can affect the outcomes and objectives. They need to be measured and their likelihood must be anticipated, defined, and consequences judged. It is important to determine the levels of risk that an organization can take so that they remain within the capacity of the available resources in terms of finance, manpower and other factors.
Risk tolerance differs from organization to organization and the ability to deal with risks is often a measure of the entrepreneurship that the owners or stakeholders are prepared to undertake. A higher tolerance to risk can lead to better bottom lines, as long as all risks are managed expeditiously and not allowed to affect the working of the organization.