Multiple Choice
Which of the following best describes a purchase order?
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1. Introduction to Accounting
Types of Accounting
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The type of business risk that refers to a possible risk arising from a business decision or move is called _____.
A
Financial risk
B
Strategic risk
C
Operational risk
D
Compliance risk
Verified step by step guidance1
Understand the concept of business risk: Business risk refers to the possibility of losses or lower-than-expected profits due to uncertainties or adverse conditions in the business environment.
Identify the types of business risks: Common types include financial risk, strategic risk, operational risk, and compliance risk. Each type has distinct characteristics.
Define strategic risk: Strategic risk arises from decisions or moves made by a business, such as entering a new market, launching a new product, or changing business strategies. These decisions can lead to potential losses if they do not align with market conditions or fail to achieve desired outcomes.
Compare strategic risk with other types: Financial risk relates to monetary aspects like debt or interest rates, operational risk pertains to day-to-day processes, and compliance risk involves adhering to laws and regulations. Strategic risk is unique because it focuses on long-term decisions and their impact.
Conclude that the correct answer is strategic risk, as it specifically refers to risks arising from business decisions or moves.
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