CRISC Certified in Risk and Information Systems ControlInformation Technology and SecurityEasy
A global manufacturing company is expanding its operations into new markets. The company's risk management team is tasked with identifying potential risks associated with these new ventures, including geopolitical instability, new regulatory compliance requirements, and cultural differences affecting business practices. Which type of risk is the team primarily focusing on in this scenario?
- AReputational Risk
- BFinancial Risk
- COperational Risk
- DStrategic Risk
Show answer & explanationAnswer & explanation
Correct answer: D. Strategic Risk
Strategic risk refers to the risks associated with the business's overall strategy and objectives, including expansion into new markets, and factors like geopolitical, regulatory, and cultural aspects.
Why the other options are wrong
- A. Reputational risk is the risk of damage to a company's good name and standing, which can be an outcome of other risks but not the primary focus of identifying expansion-related challenges.
- B. Financial risk pertains to monetary losses, such as credit risk, liquidity risk, or market risk, which are not the primary focus here.
- C. Operational risk relates to risks arising from inadequate or failed internal processes, people, and systems or from external events, not typically market expansion itself.
Strategic Risk
The risk that an organization's strategy or its execution will prove to be flawed, leading to a failure to achieve objectives, often stemming from external factors or major business decisions.
- Associated with an organization's long-term goals.
- Includes market shifts, competitive landscape, regulatory changes.
- Can impact overall business viability and direction.
Memory trick: SOS, I'm 'Stuck' on a 'Strategic' mission!