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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management

Mahalakshmi Foods Ltd. board reviews its risk register. Item 1: a competitor launching a cheaper product. Item 2: a fraud by a finance employee. Item 3: new labelling rules from the food regulator. Item 4: a flood damaging a warehouse. Which option correctly classifies the items in order as market/strategic, operational (internal), compliance/regulatory and external/natural-event risk?

Items 1, 2, 3 and 4 in that order are correct: the competitor product is a market or strategic risk, employee fraud is operational, new labelling rules are compliance or regulatory risk, and the flood is an external natural-event risk.

  1. AItems 1, 2, 3, 4Correct
  2. BItems 2, 1, 4, 3
  3. CItems 3, 2, 1, 4
  4. DItems 1, 4, 3, 2

Explanation

A competitor's cheaper product is a market or strategic risk. Employee fraud arises from internal processes and people, so it is operational. New labelling rules are regulatory and compliance. A flood is an external natural event. The other options mismatch at least one pair, such as treating the fraud as regulatory.

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