You know what risk is, but if you’ve ever worked with a security professional, you may have heard the terms “inherent risk” and “residual risk.”
You may be wondering what these terms mean, what they mean for your organization’s security, and how you can measure each? Fortunately, Circadian Risk’s assessment tool gives you an easy way to understand and measure your risk and threat impacts.
Impact and Consequence: What is the difference?
Inherent risk vs. residual risk: what’s the difference?
You probably have a pretty good idea of how to calculate risk: risk is probability of a threat occurring, multiplied by the severity of that threat’s impact on your organization or site. Some very probable events may have little or no impact, while others — like the COVID-19 pandemic – are unlikely, but will completely change your business. Inherent risk is the initial risk you’re calculating when you’re conducting a risk analysis.
Inherent risk is the risk that’s intrinsic to the site itself. If your site is in a floodplain, or if a building has many entrances that might be difficult to monitor, the risks of a flood or an unauthorized person walking onto a site are intrinsic to the site. Inherent risk is the intrinsic risk that exists because of several factors: its location, your mission, time of year or day, historic considerations, etc.
Residual risk is the risk that’s left over after you implement controls and safety measures. If you have a secondary site that’s not in a floodplain, for example, or if you close off most of the entrances. There’s still a risk of a flood or an unauthorized guest, but it’s smaller.
To use a metaphor, everyone has intrinsic health risks. You might be at risk of a heart attack because of several factors intrinsic to you: your family history, medical history, and lifestyle. If you implement controls, like an exercise regimen and healthy diet, you reduce your risk, but there is still some residual risk.
In other words, you can’t remove all risk. Leftover risk is residual risk.
How can you use Circadian Risk to measure risk?
Our tool focuses on scenario-based risk assessments — risk assessments directed toward a specific compliance, threat, concern, or hazard. Rather than assessing the vulnerabilities of an entire organization, a scenario-based assessment evaluates the risk of vulnerabilities related to a specific scenario.
Our feature, which is completely customizable, offers a question set for each scenario. What is the probability of an event/scenario occurring? What is the impact of that event if it were to occur at that location? These are the initial variables we will help you calculate to identify your inherent risk.
Inherent risk is a very powerful feature. For one thing, each of your organization's sites has its own inherent risks. For another, assessing each site will give you a baseline of all your locations’ risks, whether you have 10 sites or 100. Then you can see at a glance, which sites have the highest inherent risk, and prioritize those sites. With inherent risk you can prioritize your locations, and focus on assessing the buildings with the highest risk.
By using data to measure and manage your risk, you can minimize your liability to risk quickly and efficiently.
Do you need to better understand your inherent risk? Schedule your personalized demo today.