About this interactive
When we mitigate a risk, it usually does not go away completely. The Inherent and Residual Risk lesson gives the two names.
Inherent risk is the risk as it is at first: what risk analysis finds before any plan or control is applied. In the lesson, five risks come out of analysis at $100,000, $10,000, $30,000, $120,000 and $10,000.
Mitigation reduces the probability that the event happens, or the impact if it does. The $100,000 risk might come down to $30,000, and a $10,000 risk to $2,000.
Residual risk is the risk that continues after mitigation: the $30,000 and the $2,000.
A quick test for each card: is this the risk before anything was done about it, or what is still there after the control is in place?
Residual risk is what the company is left carrying, so it is what gets compared with the risk threshold, and the drop from inherent to residual is the benefit a control delivers.
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