BEC Strategic Planning and Risk Management 3 — Questions and Answers
Question 1: Which of the following is an example of a strategic risk?
- A major competitor launching a disruptive technology that renders the company's products obsolete (Correct answer)
- An employee accidentally deleting a financial database file
- A natural disaster destroying a company warehouse
- A vendor failing to deliver raw materials on schedule
Correct answer: A major competitor launching a disruptive technology that renders the company's products obsolete
Strategic risk arises from events or trends that threaten the organization's ability to achieve its long-term goals, such as competitive disruption, regulatory shifts, or changes in customer preferences.
Question 2: Corporate social responsibility (CSR) in a business context means:
- Companies integrating social and environmental concerns into operations beyond legal requirements (Correct answer)
- Companies maximizing shareholder returns as the sole business objective
- Companies donating a fixed percentage of profits to charitable organizations
- Companies complying with all applicable laws and regulations
Correct answer: Companies integrating social and environmental concerns into operations beyond legal requirements
CSR refers to a company's voluntary commitment to operate ethically and contribute positively to society and the environment, beyond what is legally mandated.
Question 3: A risk heat map (risk matrix) plots risks by:
- Probability of occurrence versus potential impact (Correct answer)
- Cost to mitigate versus time required to address
- Number of affected employees versus financial exposure
- Source of risk (internal/external) versus risk category
Correct answer: Probability of occurrence versus potential impact
A risk heat map is a visual tool that plots each identified risk on a grid based on its likelihood of occurring and the severity of its impact, helping prioritize risk responses.
Question 4: Vertical integration as a corporate strategy involves:
- A company expanding into supply chain stages it previously outsourced (upstream or downstream) (Correct answer)
- A company merging with a direct competitor in the same industry
- A company diversifying into unrelated industries
- A company expanding internationally into foreign markets
Correct answer: A company expanding into supply chain stages it previously outsourced (upstream or downstream)
Vertical integration is a strategy where a company takes ownership of its supply chain — backward integration (acquiring suppliers) or forward integration (acquiring distribution channels).
Question 5: The balanced scorecard's 'learning and growth' perspective focuses on:
- Employee skills, organizational culture, and IT infrastructure needed for future success (Correct answer)
- Current quarter revenue growth and earnings per share
- Customer retention rates and satisfaction scores
- Efficiency of internal manufacturing and service delivery processes
Correct answer: Employee skills, organizational culture, and IT infrastructure needed for future success
The learning and growth perspective addresses the organizational foundation — human capital, information systems, and culture — required to support the other three scorecard perspectives.
Question 6: A company uses a PESTEL analysis to evaluate which category of external factors?
- Political, Economic, Social, Technological, Environmental, and Legal factors (Correct answer)
- People, Equipment, Systems, Technology, Efficiency, and Logistics factors
- Pricing, Expenses, Sales, Trade, Earnings, and Liability factors
- Products, Expansion, Strategy, Talent, Execution, and Loyalty factors
Correct answer: Political, Economic, Social, Technological, Environmental, and Legal factors
PESTEL analysis is a strategic framework for scanning the macro-environment by systematically examining Political, Economic, Social, Technological, Environmental, and Legal factors that affect the organization.
BEC Strategic Planning and Risk Management 3
Which of the following is an example of a strategic risk?