What term describes the potential effect of an adverse event on objectives, after the application of controls to mitigate the adverse event?

The potential effect of an adverse event on objectives, after applying controls to mitigate that adverse event, is referred to as residual risk. This term encapsulates the concept that even after implementing measures aimed at reducing risk, some level of risk remains.

In risk management, mitigating actions are taken to reduce the likelihood or impact of adverse events. However, it is acknowledged that complete elimination of risk is not practically achievable. The remaining risk — the portion that persists after controls are applied — is what constitutes residual risk. Organizations must accept that some level of risk is inevitable and that the management of this residual risk is a key aspect of strategic planning and operational management.

Understanding residual risk helps organizations make informed decisions regarding their risk tolerance and the effectiveness of the controls in place. It can also guide further actions to either enhance controls, accept the risk, or determine if additional resources should be allocated to manage the remaining potential impacts.