National Check Professional (NCP) Certification Practice Test

Strategic Risk is associated with what aspect of a financial institution?

1. Risk management and internal controls

2. Future business plans and mission

3. Daily operational processes

4. Customer service and satisfaction

The correct answer is: Future business plans and mission

Strategic risk pertains to the potential for losses resulting from adverse business decisions, improper implementation of decisions, or a lack of responsiveness to industry changes. This type of risk is closely linked to the future direction and objectives of the financial institution, which is reflected in its business plans and mission. Understanding strategic risk is essential for ensuring that an institution's long-term strategies align with its overall mission and goals. It involves evaluating how well the institution can adapt to market changes, competitive pressures, and shifts in customer needs. In contrast, risk management and internal controls focus more on mitigating operational and compliance risks, daily operational processes refer to the routine functions that keep the institution running, and customer service and satisfaction are related to the institution's interactions with its clients, which can influence but are not directly encompassed by strategic risk.