Risk Tolerance
Risk tolerance is the organization’s personalized threshold for embracing the unknown. It’s a finely tuned balance that guides strategic decisions to combine financial strength with market dynamics and innovation pursuits.
A venture capitalist demonstrates a high risk tolerance by investing substantial funds in a start-up with groundbreaking ideas but no proven track record. In taking this risk, they accept the possibility that the entire investment may be lost in pursuit of substantial returns.
Similarly, a retiree opting to put their savings into fixed deposits or government bonds showcases a low risk tolerance by prioritizing capital preservation and consistent (albeit smaller) returns over potential high gains associated with higher risk.