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Risk capacity refers specifically to the maximum amount of risk that an entity can absorb while still being able to achieve its objectives. This concept is crucial in enterprise risk management as it helps organizations determine how much risk they can take on without jeopardizing their financial stability, operations, or long-term goals.

Understanding risk capacity involves evaluating the organization's resources, financial health, and ability to recover from potential losses. It establishes a framework within which risk tolerance and risk appetite can be assessed. Essentially, risk capacity serves as a boundary within which an organization must operate when making strategic decisions, ensuring that it does not overextend itself.

In contrast, other definitions provided focus on different aspects of risk management. For instance, the maximum risk an entity can tolerate pertains more to subjective measures of what an organization might be willing to accept rather than its actual limits. The immediate risk levels of an organization describe current exposure rather than maximum capabilities. The overall risk appetite relates to stakeholder preference and willingness to engage with risk but does not encapsulate the absolute thresholds set by the organization's capacities.