Which type of risk describes the potential adverse outcomes remaining after controls are implemented?

The type of risk that describes the potential adverse outcomes that persist even after controls are implemented is referred to as residual risk. This term is crucial in operational risk management, as it acknowledges the realities of risk management processes.

Inherent risk is the level of risk that exists in the absence of any controls and represents the natural exposure to risk before any interventions. Controlled risk is not a commonly used term in risk management literature and may lead to confusion. Current risk may imply a presently faced risk but does not capture the essence of risk after controls.

Residual risk arises when organizations apply controls to mitigate inherent risks, but due to various factors—such as imperfect controls, unpredictable environments, or evolving threats—some level of risk remains. It is essential for organizations to understand their residual risks so they can make informed decisions about risk acceptance, further mitigation strategies, or potential risk transfers. Recognizing and managing residual risk ultimately helps organizations strengthen their overall risk management framework.