Which risk type is associated with security or privacy breaches or poor customer experience?

Which risk type is associated with security or privacy breaches or poor customer experience?

• A. Reputational risk
• B. Credit risk
• C. Operational risk
• D. Regulatory risk

Answer: (A)

Reputational risk is the risk of damage to how customers, partners, and the market view an organization. When security or privacy breaches occur, or when customers have a consistently poor experience, trust in the brand erodes. That loss of trust can lead to customer churn, negative media attention, and a drop in business opportunities, all of which directly hit the company’s reputation and long-term value. Credit risk is about the chance that borrowers won’t repay loans, which isn’t the issue described. Regulatory risk concerns failing to comply with laws and regulations and the penalties that follow. Operational risk covers failures in processes, people, or technology, which can cause losses, but the scenario centers on public perception and trust, which is characteristic of reputational risk.

Reputational risk is the risk of damage to how customers, partners, and the market view an organization. When security or privacy breaches occur, or when customers have a consistently poor experience, trust in the brand erodes. That loss of trust can lead to customer churn, negative media attention, and a drop in business opportunities, all of which directly hit the company’s reputation and long-term value.

Credit risk is about the chance that borrowers won’t repay loans, which isn’t the issue described. Regulatory risk concerns failing to comply with laws and regulations and the penalties that follow. Operational risk covers failures in processes, people, or technology, which can cause losses, but the scenario centers on public perception and trust, which is characteristic of reputational risk.