ExpertHard1 markMultiple Choice
CPA · Question 17 · Area I: Business Analysis
A multinational corporation is assessing ESG-related risks using the COSO ERM framework. The company identifies that changing weather patterns could disrupt its supply chain in Southeast Asia. This is an example of which type of risk?
A multinational corporation is assessing ESG-related risks using the COSO ERM framework. The company identifies that changing weather patterns could disrupt its supply chain in Southeast Asia. This is an example of which type of risk?
Answer options:
A.
Transition Risk
B.
Physical Risk
C.
Reputational Risk
D.
Litigation Risk
How to approach this question
Distinguish between Physical (weather, sea level) and Transition (policy, market, tech) risks.
Full Answer
B.Physical Risk✓ Correct
Physical risks are those resulting from climatic events, such as storms, floods, and droughts, which can damage assets or disrupt supply chains.
Common mistakes
Confusing physical risks with transition risks (regulatory changes).
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