Tolerability and acceptability of the risk for projects in the civil sector

Assessing the riskiness of the investments is one of the key steps in the decision-making process. However, the lack in the legislative landscape of criteria for the acceptability of investment risk makes it difficult to express judgments of economic convenience based on shared criteria and objective data. In an attempt to overcome this regulatory gap, the aim of the paper is twofold: 1. to define minimum levels of acceptance of investment risk; 2. to outline an approach for the estimation of these threshold values. With reference to the first objective, acceptability and tolerability thresholds of risk are borrowed from the As Low As Reasonably Practicable (ALARP) logic. In accordance with this principle, which is widely used in safety risk, a risk is defined as ALARP if it falls within the above thresholds or if the costs for its mitigation appear disproportionate to the benefits that can be achieved. With regard to the second objective, the theoretical reference is the Capital Asset Pricing Model (CAPM) which defines how to assess the minimum expected return on an investment project with a given risk profile. Thus, the combined use of the CAPM and statistical survey tools makes it possible to estimate specific risk limit values as a function both of investment sector and with respect to the territorial context in which the project is located. Finally, the described approach is validated through an application to the civil enterprise sector in Campania Region (Italy).