Risk management is not new, but the way organizations look at risk has shifted. Modern businesses are moving at a breakneck speed, continuously making changes to their tech stack, product lines, services, vendor ecosystem, and org structures. With these changes, new risks can be introduced rapidly into an organization – and existing risks may be amplified. Many organizations have opted to deal with risk proactively and create comprehensive strategies for different types of risk. To manage risks appropriately, it’s vital to understand how to evaluate risk prior to and after certain controls are designed and implemented. This brings us to two terms that you may have heard of before: inherent risk and residual risk.
In this article, we will address what inherent and residual risk is, how to measure inherent risk vs. residual risk, why risk management programs need to include third parties, and how to best manage risk moving forward.
Inherent Risk vs. Residual Risk
What is inherent risk?
Inherent risk is the risk that an organization could encounter when no controls (i.e., activities, procedures, and processes your organization implements to mitigate risks and/or meet…
