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ACCA Strategic Professional · Strategic Business Leader · Identification, assessment and measurement of risk

Zephyr Foods, a listed manufacturer, sources its main ingredient from a single supplier in a region prone to flooding. The board's risk register lists this as a threat that could halt production for weeks. Which category of risk does this most directly represent?

This is operational risk. The danger comes from dependence on one supplier in a flood-prone region, which could interrupt production processes and supply. It is not a financing, regulatory or strategic positioning issue, so operational risk is the category that fits.

  1. AStrategic risk arising from the choice of business model
  2. BOperational risk arising from supply chain dependencyCorrect
  3. CFinancial risk arising from capital structure
  4. DCompliance risk arising from breach of regulations

Explanation

Reliance on a single supplier that may fail to deliver disrupts day-to-day processes, which is operational risk. It is not about capital structure or regulation, and it does not stem from a strategic choice of markets or products, so the other categories fit less well.

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