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19/01/2017 / Inherent & Residual Risk, Risk Assessment

The Scoring of Residual Risk

We previously discussed the pros and cons of identifying and assessing the level of inherent risk. This article assumes that inherent risk is used and that the effectiveness of controls is separately assessed in order to arrive at a residual risk assessment.

The first issue to consider is how the level of residual risk is assessed taking into account the scoring of inherent risk and the level of control effectiveness. One approach is to apply subjective judgement without applying any mathematical relationship between inherent risk and the level of control effectiveness.

A second method is to apply a mathematical approach.

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