Inherent risk, in risk management, is an assessed level of raw or untreated risk; that is, the natural level of risk inherent in a process or activity without doing anything to reduce the likelihood or mitigate the severity of a mishap, or the amount of risk before the application of the risk reduction effects of controls.[1][2] Another definition is that inherent risk is the current risk level given the existing set of controls, which may be incomplete or less than ideal, rather than an absence of any controls.[3][4]
Inherent risk is contrasted with residual risk, which is the amount of risk left after treatment and added security measures.
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Audit Risk: Inherent Risk Basics
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10 Assessing Inherent Risk
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See also
- Inherent risk (accounting), particularly, the consideration of the probability of material misstatements in financial records
References
- ^ Gregory Monahan (2008). Enterprise Risk Management: A Methodology for Achieving Strategic Objectives. John Wiley & Sons. ISBN 9780470372333.
- ^ Rachel Slabotsky (7 September 2017). "Inherent Risk vs. Residual Risk Explained in 90 Seconds". www.fairinstitute.org. FAIR Institute. Retrieved 10 October 2018.
Inherent risk represents the amount of risk that exists in the absence of controls.
- ^ Rachel Slabotsky (7 September 2017). "Inherent Risk vs. Residual Risk Explained in 90 Seconds". www.fairinstitute.org. FAIR Institute. Retrieved 10 October 2018.
Inherent risk is current risk level given the existing set of controls rather than the hypothetical notion of an absence of any controls.
- ^ Jack Jones. Measuring and Managing Information Risk: A FAIR Approach. FAIR Institute.
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This page was last edited on 20 December 2022, at 13:31