Two charts represent the concept of a risk tolerance boundary. A risk tolerance boundary is a graphical representation of the tradeoffs an individual, organization, or agency is willing to make among cost and risk or value and risk. The horizontal axis represents Cost or Value Risk and the vertical axis represents Value Scores or Cost. Once defined and plotted, a Risk Tolerance Boundary allows individuals, agencies or organizations to define acceptable and unacceptable areas. IT alternatives or investments can then be plotted to determine in which area they fall or, how far outside the acceptable area they fall.
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