Residual risk

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The residual risk is the risk or danger of an action or an event, a method or a (technical) process that, although being abreast with science, still conceives these dangers, even if all theoretically possible safety measures would be applied (scientifically conceivable measures).

The formula to calculate residual risk is (inherent risk) x (control risk) where inherent risk is (threats × vulnerability).

In the economic context, residual means “the quantity left over at the end of a process; a remainder” (dictionary.com).

In the property rights model it is the shareholder that holds the residual risk and therefore the residual profit.

See also[edit]

a residual risk is a portion of the risk that is left after a risk assessment has been conducted.

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