Understand the Difference between Residual and Secondary Risks

In this podcast, Ricardo talks about the difference between the secondary risk and residual risk. He explains that the secondary risk is generated as a side effect the implementation of a response. Residual risk is one that remains, even after implementing responses. Ricardo gives several examples for these two types of risks.

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Episode transcript

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Hello everybody welcome to the five minutes of PM podcast today, or like to discuss the difference between Secondary and Residual, Risks, it's very important because a lot of people do not understand what the real difference between a Secondary weed risk and a residual risk. We start explaining what does a Secondary risk Secondary Risks are the risks that are generated when you implement a response.

So be, is it on the response that you will implement to avoid or to mitigate some Risks you generate new Risks? So let me give you two examples. The first one legible that I have very critical and expensive equipment. Very, very exciting. So to protect my organism from any lost on does a case of any damage, major damage on these equipment. I bought an insurance.

So being sure of this, almost the point that, that financial damage, ah, that generate the risk. What did you order him? This insurance created for me to say secondary. We risk the risk of not having enough reserves to cover the auto Risks because of that expanding most of my reserves to do this mitigation. So one way or, or generated by another second example, let's suppose that I'm building a home and I'm I found a supplier to provide me bricks.

Then I hired them and I have a risk, or they do not deliver the amount of breaks that I need on the deadline that I requested. So, okay. I implemented a response plan. The response plan we'll be okay. I will find another supplier. Okay, perfect. I mitigate that dramatically. The risk of not having the enough BRICS for my construction done on time, but then the other hand, I generate that a secondary risk are the breaks.

The same are the quality, the same aren't they extremely similar or not because he imagined that, that they delivered to me different bricks with a different quality, a different process manufacturing process or a different material. So this is a Secondary Risks, it's very, very important. When I talk about all Secondary we risk am not talking about at Secondary issue. It's different issues. It's a problem.

And not that is changing. The supplier will bring it. You are the quality problem that I'm using in this example know, I'm just telling you that this Risks will appear. So this is a Secondary Risks that you can okay. A void that you can mitigate the, or even you can see that. Yeah. It's your decision, but it's very important based on the response that you give, you can generate Risks. But if the response you decided to implement each create a huge, huge, and problematic risk.

This suggestion that I give to you it's change changed the response because maybe the Secondary Risks, we'll be sure the dramatic that is pointless to think. What about reduction of the main risks? So this is very important about the Secondary risk, not talking about the residual risk Residual risk are the risks that remains even after all the analysis and all responsible planning, implementation.

So you did or response, you did the old analysis and they still remain there. Why they remain usually because they are really unknown. The are, there is something that you don't have any kind of control. Second. They are, maybe two is more that you don't need to worry to much what you do with this Residual Risks this Residual Risks do you put then on the watch list and during the monitoring control Risks so the last process of Risks management, you will check if the are still acceptable and if they are still unknown, usually let me give you a couple of examples first.

Okay. The concern about a potential damage of my Beth and Dan. Okay. I have two concerns. The first, my family, my daughters, my wife, they can have trouble with financial trouble because I'm the provider and I will not be here. Okay. Then the decision of response to do that is that I will be an insurance. If I buy a reasonable insurance, I can protect this pretty well. But I think, do you have a, not a concern?

It's the sadness that, that you will be staying after my death, this insurance doesn't cover ensured us will not make you alive. Again, it's impossible. Insurance will not handle this. You can find all the ways of doing this aura kind of response, but it's a, quite a gnome the environment that we can think easy to depend off your religion. So if your beliefs, and it's not something mathematical as the financials or a resource, so this is the residual risk.

So this risk, I will need to manage, for example, a Reese that I don't have any control government and I can pass in a new law have that can make a dramatic impact on my project. So what I need to do is just monitor because I cannot control of it, the Congress and how they work to do that, and not powerful enough to do that. So I need just one understand what's going on and to check which kind of impact can I face. If this Risks happens? Yes, will be the Residual risks.

So the risks that will remain, I hope you could understand the Difference short for the long Podcast and see you next week with another five minutes BM Podcast.

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Understand the Difference between Residual and Secondary Risks

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