MANAGEMENT

Detailed explanation-1: -Residual risk is the risk that remains after efforts to identify and eliminate some or all types of risk have been made. Residual risk is important for several reasons. First to consider is that residual risk is the risk “left over” after security controls and process improvements have been applied.

Detailed explanation-2: -In risk management, inherent risk is the natural risk level without using controls or mitigations to reduce its impact or severity. Risk control procedures can lower the impact and likelihood of inherent risk, and the remaining risk is known as residual risk.

Detailed explanation-3: -An example of residual risk is given by the use of automotive seat-belts. Installation and use of seat-belts reduces the overall severity and probability of injury in an automotive accident; however, probability of injury remains when in use, that is, a remainder of residual risk.

Detailed explanation-4: -A residual risk is a controlled risk. It’s the risk level after controls have been put in place to reduce the risk.

Detailed explanation-5: -At a high level, the formula is as follows: Residual risk = Inherent risks-impact of risk controls. Residual risks can also be assessed relative to risk tolerance (or risk appetite) to evaluate the effectiveness of recovery plans.