What is a potential consequence of failing to manage risk effectively?

• A. Increased employee satisfaction
• B. Improved market competition
• C. Financial losses, reputational damage, and legal penalties
• D. Stronger relationships with vendors

Answer: (C)

Managing risk effectively is crucial for organizations to protect their assets and maintain operational integrity. When risk management is neglected, a range of serious consequences can arise. Financial losses may occur due to unexpected events impacting operations, such as data breaches or compliance failures that lead to costly recovery efforts. Reputational damage is also a significant risk; stakeholders, including customers and partners, may lose trust in the organization if they perceive it as inept or careless regarding its cybersecurity practices. Finally, legal penalties can arise from non-compliance with regulations, leading to fines or lawsuits.

In contrast, increased employee satisfaction, improved market competition, and stronger relationships with vendors typically stem from effective risk management and operational resilience rather than the lack thereof. These outcomes are proactive benefits of addressing risks, not consequences of failing to manage them.