What does the term “residual risk” mean?

Residual risk refers to the level of risk that continues to exist after an organization has implemented all possible mitigating controls and measures to reduce risk. It is an important concept in risk management, as it acknowledges that no system can be completely risk-free, regardless of the controls in place. Organizations must therefore assess and accept this remaining risk, while deciding how to manage or transfer it accordingly.

Understanding residual risk aids organizations in making informed decisions about their overall risk posture and helps prioritize areas that may still require attention or additional resources. In the context of risk assessment, identifying residual risk is crucial for ensuring that all stakeholders comprehend the potential threats that remain, even after controls have been put into effect.

The other options describe different concepts related to risk management. The total risk before controls are applied refers to inherent risk, which is distinct from residual risk. The risk associated with human error points to specific vulnerabilities rather than the overarching concept of risk that persists after mitigation. Finally, the risk that is insured by the organization deals with the financial aspect of risk transfer, not the residual risk itself.