Brian Smith, the CEO of Carter National Bank, anticipates that interest rates may fall in the future and as a result buys $100 million in 30 year Treasury Bonds for the bank's security portfolio. Instead, interest rates rise, causing the value of these bonds to fall. This would be an example of which of the following types of risk?

Strategic risk

Full question:

Brian Smith, CEO of Carter National Bank, decides that interest rates are going to fall in the future and as a result buys $100 million in 30 year Treasury Bonds for the bank's security portfolio. Instead, interest rates rise causing the value of these bonds to fall. This would be an example of which of the following types of risk?

A) Operational risk

B) Legal risk

C) Compliance risk

D) Strategic risk

E) Reputation risk

Answer:

This would be an example of Strategic risk

Explanation:

Strategic risk is a potential cause of loss that might occur from the pursuance of an ineffective business plan. These are the risk disclosures that can eventually influence shareholder profit or the viability of the organization.

Eventually, if the strategic risk evaluation method is not set and maintained by management as an essential part of the business processes, the risk management means will quickly mislay its influence and will not continue to or present on its conventional role. Strategic risk requires to be both externally and inwardly recognized, maintained and mastered.