A company that makes and sells fast-fashion is experiencing falling sales as consumers shift their preference to buying better quality and longer lasting clothes. Using the root-cause method and risk taxonomy, which category of risk best describes this situation? a. A financial market risk. b. A compliance, conduct, and reputation risk. c. A supply chain risk. d. A strategic risk.
Question
A company that makes and sells fast-fashion is experiencing falling sales as consumers shift their preference to buying better quality and longer lasting clothes.
Using the root-cause method and risk taxonomy, which category of risk best describes this situation?
a. A financial market risk.
b. A compliance, conduct, and reputation risk.
c. A supply chain risk.
d. A strategic risk.
Solution
The category of risk that best describes this situation is "d. A strategic risk."
Strategic risks are associated with operating in a particular industry at a particular time. They arise from changes in the business environment and can affect the strategic growth of a company. In this case, the shift in consumer preferences is a strategic risk because it directly impacts the company's business model and strategy, which is based on fast-fashion. The company needs to reassess its strategy and possibly shift towards producing better quality and longer lasting clothes to meet the changing consumer preferences.
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