Residual risk is an assessment of a firm’s overall risk profile after considering the firm’s methods of assessing and monitoring its business risks. A firm’s residual risk is assessed as Low, Moderate-Low, Moderate-High or High in comparison with other IIROC Dealer Member firms.

Low Risk:
By placing a firm in this risk category, IIROC has assessed the likelihood or probability of the firm becoming capital deficient as extremely unlikely.

The firm has either adopted a lower risk business model or has mitigated an average business risk model with risk controls indicating effective corporate governance and the proper management of business risks.

Moderate-Low Risk:
By placing a firm in this risk category, IIROC has assessed the likelihood or probability of the firm becoming capital deficient as very unlikely.

The firm has adopted an average risk business model or has mitigated an above average business risk model with risk controls including a good corporate governance structure and excellent methods to monitor and manage risk.

Moderate-High Risk:
By placing a firm in this risk category, IIROC has assessed the likelihood or probability of the firm becoming capital deficient as unlikely.

The firm has adopted an average or above average risk business model. However, improvements are required in such areas as operating performance, capitalization, management processes and/or the firm has issues to address relating to its risk controls.

High Risk:
By placing a firm in this risk category, IIROC has assessed the likelihood or probability of the firm becoming capital deficient as much higher than average.

The firm has adopted an above average business risk model but has not effectively mitigated the risk with sufficient capital, earnings and/or risk controls related to corporate governance and risk management.