What does the term "residual risk" refer to?

Residual risk refers to the amount of risk that remains after all known risks have been identified and controls have been applied to mitigate them. In the context of risk management, it is essential to understand that while various measures can be taken to reduce or eliminate certain risks, it is often impossible to eliminate all risks entirely.

For instance, even after implementing security measures, there may still be a likelihood of a data breach, which represents the residual risk. This concept emphasizes the importance of recognizing that while controls can minimize risk, an inherent level of risk will likely persist. Organizations must continuously assess and monitor residual risk to ensure they are aware of their risk exposure and can make informed decisions about risk management strategies.

The other options pertain to different aspects of risk management. Initial risk refers to the state of risk prior to any controls, fully mitigated risk implies that the risk no longer exists (which does not contribute to the analysis of residual risk), and risk identified in a risk assessment is simply the process of determining potential risks before controls are applied. Understanding the distinction is crucial for effective risk management and development of appropriate mitigation strategies.