ACCA Strategic Professional · Strategic Business Leader · Identification, assessment and measurement of risk
Kestrel Retail has an established risk management process. A newly appointed risk manager proposes classifying a competitor's entry into Kestrel's core market with a cheaper online model as a risk to be recorded and assessed. Under a typical business risk classification, which category does this belong to?
It is strategic or business risk. A rival entering with a cheaper online model threatens the company's market position and the success of its chosen strategy. It is not a pure hazard, compliance or internal control failure issue.
- AHazard risk, because it can only produce losses
- BCompliance risk, because competition law applies
- CStrategic (business) risk, because it affects the viability of the chosen market positionCorrect
- DControl risk, because internal controls may fail
Explanation
A competitor with a cheaper model threatens Kestrel's strategic position and competitive advantage, which is strategic or business risk. Hazard risk refers to pure downside events like fire, while competitive threats can be managed through strategy and may also offer opportunity. Control risk concerns failures of internal controls.
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