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4 Examples of Residual Risk

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Residual risk is the risk that remains after you have treated risks. Risk management involves treating risks meaning that a choice is made to avoid, reduce, transfer or accept each individual risk. It is difficult to completely eliminate risk and normally there is a residual risk that remains after each risk has been managed. The following are a few examples of residual risks.

1. Risk Avoidance

A business decides to avoid the risk of developing a new technology because the project has many risks. The residual risk is that a competitor will develop the technology instead and the business will become less competitive.

2. Risk Reduction

An airline reduces the risk of an accident by improving maintenance procedures. Residual risks remain in the process including a chance of human error such as skipping steps in the procedure.

3. Risk Transfer

A homeowner transfers the risk of flood damages to their home by getting flood insurance. Residual risks include the insurance deducible amount and the chance that the insurance company will go bankrupt as the result of a large scale flood and fail to pay.

4. Risk Acceptance

When a risk is accepted, the entire risk becomes a residual risk. For example, an investor may accept the risk that a stock will go down because they predict that the potential rewards of the investment outweigh the risks.

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Business Risks

A list of common business risks.

Risk Treatment

The five things that can be done about risk.

Risk Management Effectiveness

A metric for measuring risk management.

Positive Risk

The potential that you'll achieve too much of a good thing.

Dread Risk

Any risk that people have a strong aversion too.

Risk Taking

The definition of risk taking with examples.

Risk Examples

A list of risk examples by type.

Risk Probability vs Risk Impact

The two main factors in modeling a risk.

Calculated Risk

A definition of calculated risk with an example.

Relative Risk

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Project Risk

A list of common project risks.

Project Risk

A list of common project risks.

Project Stakeholder

A list of common project stakeholders.

Risk vs Issue

The difference between a risk and an issue.

Secondary Risk

The definition of secondary risk with examples.

Risk Register

A guide to creating a risk register with an example.

Risk Perception

A definition of risk perception with examples.

Implementation

The common types of implementation.

Project Risk Management

A reasonably complete guide to project risk management.
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