Certified Risk Manager Principles Practice Exam

The correct answer highlights that strategic risk encompasses external factors such as customer demand and competitive pressure. These elements directly influence an organization's long-term goals and decision-making processes. Understanding and managing strategic risk is vital because it affects the organization's market positioning and overall success.

Customer demand reflects how well a company's products or services resonate in the market, impacting revenue and growth potential. Competitive pressure relates to how competitors’ actions can affect an organization’s market share, pricing strategies, and innovation capabilities. Therefore, strategic risks often stem from these dynamic market conditions and require comprehensive strategies to mitigate them effectively, ensuring that the organization can adapt and thrive in its competitive landscape.

In contrast, operational risk focuses on internal processes and procedures, financial risk pertains to monetary losses and market changes, and hazard risk deals with events that could cause harm or loss, primarily from accidents or disasters. Each of these categories addresses different facets of risk management but does not specifically target the external competitive and customer-related challenges that define strategic risk.