Final answer:
Hazard Severity Category III (Cat III) is defined as having significantly degraded mission capability or unit readiness.
Step-by-step explanation:
The hazard severity category defined as having significantly degraded mission capability or unit readiness is Hazard Severity Category III (Cat III).
Category III hazards are characterized by severe fragmentation and/or few locations (less than 10), continuing decline, and extreme fluctuation. These hazards pose a serious threat to the functioning and readiness of a unit or mission.
For example, if a military unit experiences severe destruction of its infrastructure, significant loss of personnel, and a significant decline in operational capabilities, it would fall under Hazard Severity Category III.