PFMP · Question #548
Managing risk is key to the success of any initiative. Risk is considered to be inherent in any activity we do in project management and at any level. When it comes to risk tolerance definition…
The correct answer is C. Threshold or attitude of an organization towards the positive or negative effects of risks on the. Risk tolerance is defined as an organization's threshold or attitude toward both the positive and negative effects of risk on the organization's objectives.
Question
Managing risk is key to the success of any initiative. Risk is considered to be inherent in any activity we do in project management and at any level. When it comes to risk tolerance definition, which of the following is the correct one?
Options
- AThe confidence level of key stakeholders and executive management in the risk management
- BThreshold or attitude of an organization towards the negative effects of risks on the organization's
- CThreshold or attitude of an organization towards the positive or negative effects of risks on the
- DThreshold or attitude of an organization towards the positive effects of risks on the organization's
How the community answered
(48 responses)- A6% (3)
- B4% (2)
- C88% (42)
- D2% (1)
Why each option
Risk tolerance is defined as an organization's threshold or attitude toward both the positive and negative effects of risk on the organization's objectives.
This describes confidence in the risk management process itself, which relates to governance maturity rather than the definition of risk tolerance.
This definition is incomplete because it limits risk tolerance to only negative effects, omitting positive effects (opportunities) that are an integral part of a complete risk tolerance definition.
Risk tolerance encompasses the full spectrum of risk effects - both threats (negative effects) and opportunities (positive effects). This definition aligns with PMI and general risk management standards, which recognize that organizations must define their appetite for both downside losses and upside gains when establishing risk governance boundaries for the portfolio.
This definition is incomplete because it addresses only positive effects (opportunities) while excluding negative effects (threats), which are a core component of risk tolerance.
Concept tested: Risk tolerance definition in portfolio management
Source: https://www.pmi.org/pmbok-guide-standards/foundational/standard-for-portfolio-management
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