Certified Financial Management Specialist Practice Exam

Strategic risk primarily impacts what area of an organization?

1. Day-to-day operations

2. Long-term goals and outcomes

3. Market competitiveness

4. Customer satisfaction

The correct answer is: Long-term goals and outcomes

Strategic risk primarily affects an organization's long-term goals and outcomes because it involves the potential for significant losses or setbacks that can derail the broader objectives and vision of the company. This type of risk encompasses external factors such as market trends, competitive actions, regulatory changes, and shifts in consumer preferences, which can all influence the direction in which the organization strives to move. When strategic risks materialize, they can lead to poor decision-making or ineffective strategies, which may not only hinder progress toward long-term goals but can also affect the sustainability of the organization. For instance, if a company misjudges a market trend and invests heavily in a declining product line, this could have lasting negative consequences on its overall strategic plan. While other areas like day-to-day operations, market competitiveness, and customer satisfaction can be impacted by strategic risks, they are more directly tied to immediate or tactical aspects of the business rather than the overarching, long-term objectives that define the organization’s strategic framework.