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Residual Risk

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Definition:
The level of risk that remains after all mitigation efforts have been applied to a project.

Key Components:

  • Risk Mitigation Measures: Steps taken to reduce threats.
  • Acceptable Risk Level: Determining whether the remaining risk is tolerable.
  • Monitoring Strategy: Ongoing observation of residual risks.

Use Cases/Industries:

  • Construction: Managing residual safety risks even after protective measures.
  • Energy Sector: Accepting certain regulatory risks despite compliance efforts.
  • Healthcare: Addressing cybersecurity risks even after implementing firewalls.

Advantages:

  • Helps Determine Risk Appetite: Defines how much risk a company is willing to accept.
  • Prepares for Unforeseen Issues: Ensures ongoing risk monitoring.

Challenges:

  • Unavoidable Nature: Some risks cannot be entirely eliminated.
  • Difficult to Quantify: Not all residual risks can be precisely measured.

Related Terms:
Risk Tolerance, Risk Mitigation, Risk Management Strategy

Example:
A hydroelectric dam project acknowledged residual environmental risks even after implementing multiple mitigation measures.

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Synonyms:
Remaining Risk, Unmitigated Risk, Residual Uncertainty
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