Description
Residual risk refers to the amount of risk that remains after an organization has taken steps to reduce its overall risk exposure. In the Governance, Risk Management, and Compliance (GRC) industry, organizations implement various strategies such as policies, controls, and procedures to manage risks associated with their operations. However, not all risks can be completely eliminated. For example, even after implementing strong cybersecurity measures, a company may still face the risk of a data breach due to unforeseen vulnerabilities or human error. This remaining risk is what is termed residual risk. Understanding and managing residual risk is crucial because it helps organizations make informed decisions about risk tolerance and resource allocation. By accurately assessing residual risks, companies can create more robust risk management strategies, ensuring they are prepared for potential threats while aligning with compliance requirements and governance objectives.
Examples
- A financial institution implements advanced encryption and access controls but still faces residual risk of a phishing attack targeting employees.
- A manufacturing plant installs safety equipment to mitigate the risk of accidents, yet residual risk remains from potential equipment failure or operator error.
Additional Information
- Residual risk is often assessed during risk assessments and audits to ensure comprehensive risk management.
- Organizations may choose to accept, transfer, or further mitigate residual risks based on their risk appetite and strategic objectives.