What is defined as the risk remaining after controls have been selected?

The term that describes the risk that remains after controls have been implemented to mitigate or eliminate potential hazards is known as residual risk. In the context of Operational Risk Management, residual risk is an important concept because, despite taking preventive measures, there are always uncertainties and potential threats that cannot be fully controlled.

Understanding residual risk allows organizations to assess the effectiveness of their risk management strategies and make informed decisions about whether additional controls or risk acceptance measures are needed. By recognizing the existence of residual risk, personnel can better prepare for and respond to unforeseen incidents, leading to a more resilient operational environment.

This concept is crucial in ORM, as it emphasizes the need for continuous monitoring and evaluation of risks, ensuring that operational decisions are made with a clear understanding of what risks remain active even after controls are in place.