10/30/2024

Risk Capacity vs. Risk Tolerance

Understand the difference

In the world of innovation, we often hear about risk tolerance — how much risk we're comfortable taking. But there's another crucial concept that's frequently overlooked: risk capacity. Understanding the difference between these two can be the key to unlocking your association's true potential for growth and innovation.

Risk tolerance is about comfort levels. It is subjective and emotional and often based on past experiences or personal preferences. On the other hand, risk capacity is objective. It is about what your organization can actually handle regardless of how comfortable you feel about it.

Here is a powerful exercise to help you distinguish between the two.

Please select this link to read the complete article from ASAE’s Center for Association Leadership.