ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk
Toller Retail, a UK-based chain, plans to enter a new country by acquiring a local competitor. Directors worry that the new country's customers may not accept its brand and that the acquisition may not deliver expected synergies. Which classification best fits these concerns?
The concerns are strategic or business risks, because they relate to whether the chosen expansion strategy and market positioning will deliver the expected results. Such risks have potential upside as well as downside, unlike pure hazard risks, and do not arise from staff errors or regulation.
- AHazard risk, because losses can only occur and there is no upside
- BStrategic (business) risk, because outcomes depend on the choice of strategy and market conditionsCorrect
- CCompliance risk, because acquisitions are regulated
- DOperational risk, because the loss would arise from staff errors
Explanation
Concerns about brand acceptance and synergies relate to whether a chosen strategy will succeed, which is strategic or business risk and carries both upside and downside. Hazard risk has only downside. Neither compliance nor staff error is the stated source of concern.
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