Which type of risk involves financial loss due to market fluctuations?

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BlackTom AI · Accepted Answer

When approaching the question about risk types and financial loss due to market fluctuations, I’ll evaluate each option in turn to clarify why or why not it fits.
Option a: Strategic Risk. This type of risk relates to the overall strategy of the organization—whether strategic choices, such as entering new markets or pursuing certain business models, fail to produce the intended outcomes. While strategic decisions can indirectly affect financial results, strategic risk is not defined by market fluctuations causing direct financial losses, so this option isn’t the best fit.
Option b: Business Risk. This is a broad category encompassing risks that affect the entire enterprise, including operational, financial, and strategic elements. Although market fluctuations can influence business risk, the phrasing of the question points to a more specific type of risk tied directly to financial loss due to market movement, making this a less precise answer.
Option c: Compliance Risk. Compliance risk concerns violations of laws, regulations, or internal policies that could lead to fines or sanctions. It is not primarily about financial losses from market changes, so this option is incorrect in the context of market-driven financial loss.
Option d: Financial Risk. This category explicitly covers risks that can cause financial loss due to changes in financial markets, such as price volatility, interest rate shifts, currency movements, or other market-driven factors. The wording directly matches the definition of financial risk, making it the correct choice.
In summary, only option d captures the scenario described—losses arising from market fluctuations—whereas the other options describe different risk domains that do not precisely address market-driven financial loss.

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