What does residual risk refer to?

Residual risk is defined as the amount of risk that remains after risk management controls have been applied to mitigate the risks identified in a project or process. This concept acknowledges that it is often impossible to eliminate all risk; therefore, even after implementing risk reduction strategies, some level of risk will still exist. Understanding residual risk is crucial for organizations to ensure they are aware of the potential vulnerabilities and can plan for them accordingly.

For effective risk management, organizations assess their initial risks, implement controls, and then evaluate the remaining risks—this is the essence of residual risk. In this way, it serves as an important metric for decision-making, ensuring that stakeholders are informed about what risks they are still exposed to despite their efforts to minimize them.