Certified Governance Risk and Compliance (CGRC) Practice Exam

Residual risk refers to the level of risk that remains after an organization has implemented its risk treatment measures. These measures may include controls, policies, and procedures designed to mitigate identified risks. Even after these actions are taken, there may still be some remaining risk due to various factors such as the effectiveness of the controls, unforeseen vulnerabilities, or changes in the environment. Understanding residual risk is crucial for organizations because it provides insights into what risks are still present and requires ongoing monitoring and management efforts.

The other options describe different concepts in risk management that do not accurately capture the essence of residual risk. For instance, the risk identified prior to any mitigation plans refers to inherent risk rather than residual risk. Similarly, transferring risk to a third party (through means such as insurance) involves shifting responsibility rather than addressing residual risk. Finally, the assessed likelihood of a risk occurring focuses on the probability of risk, rather than the risk that remains after treatment measures have been applied. Understanding these distinctions helps organizations effectively prioritize and allocate resources in their risk management processes.