How is 'residual risk' defined?

Residual risk is defined as the level of risk that remains after an organization has implemented mitigation strategies to minimize or control the identified risks. This concept recognizes that while risk management practices can significantly reduce the likelihood and impact of risks, it is unlikely that all risks can be entirely eradicated. Therefore, after taking steps to manage risks—such as the introduction of controls, policies, or other risk mitigation measures—some degree of risk will still persist. This leftover amount is what is referred to as residual risk and is essential for organizations to understand as they move forward in their risk management efforts.

Identifying residual risk helps organizations to assess their risk exposure accurately, allocate resources effectively, and consider additional strategies for addressing ongoing risk challenges. Understanding this concept is critical for informed decision-making and strategic planning within risk management frameworks.