In risk management, what does the term "residual risk" refer to?

Residual risk refers to the risk that remains after an organization has taken steps to mitigate potential threats and vulnerabilities. In the context of risk management, organizations implement various controls and strategies to reduce their overall risk profile, but it is virtually impossible to eliminate all risks entirely. Therefore, residual risk is the portion of risk that is still present following these mitigation efforts.

Recognizing and understanding residual risk is crucial for effective risk management because it allows organizations to acknowledge the vulnerabilities that still exist and to plan for them accordingly. By doing so, organizations can allocate resources more effectively and develop appropriate response strategies for the risks that remain.

Other terms mentioned in the options help to provide a broader context within risk management. Initial risk refers to the risks that are identified before any mitigation measures are implemented, while the mention of third-party vendors indicates a specific risk category rather than the concept of residual risk itself. The total sum of all identified risks abstracts the concept further and does not address the specific outcome of mitigation efforts.