Question

What is meant by the term "residual risk"?

Amount of uncertainty remaining after all management efforts have been made



Risk levels that lie above an organization's threshold for risk tolerance



Risk that an organization has decided not to attempt to manage



Amount of risk that is characteristic of an organization's industry

Answer 1

Residual risk is the remaining level of risk after all preventive measures have been implemented, inherent to an organization's industry and cannot be fully eliminated. It's essential for informed decision-making and contingency planning in managing what cannot be avoided.

Step-by-step explanation:

The term residual risk refers to the level of risk that remains after an organization has taken all proactive measures to mitigate or manage known risks. It's the risk that persists even after all controls and responses have been implemented.

In the context of an organization's industry, residual risk is that which is inherent to the industry's activities and cannot be completely eliminated. For example, even with stringent safety protocols in place, a construction company cannot erode all risk of onsite accidents due to the nature of the work involved.

Residual risk is often considered when conducting risk assessments or designing management strategies. Understanding the residual risk that is characteristic of an organization's industry is crucial for informed decision-making and contingency planning. It helps organizations prepare for potential disruptions or losses, and to decide whether the remaining level of risk is acceptable or if further measures are needed to reduce it further.