Certified Management Accountant Practice Exam 2025 - Free CMA Practice Questions and Study Guide

Strategic risk encompasses the potential for losses or setbacks that arise from adverse changes in the business environment, which includes factors such as political risks and evolving customer needs. These risks can significantly affect an organization's ability to meet its objectives and implement its strategy.

Political risks may involve changes in government policies, regulations, or political instability that can impact market conditions and business operations. Similarly, changing customer needs reflect shifts in consumer preferences and behaviors, which require organizations to adapt their strategies accordingly.

Both of these elements illustrate how strategic risk is closely related to the long-term positioning of a business and the necessity for continual assessment of the external landscape in order to thrive. An organization that fails to consider these strategic risks can suffer from misalignment between its offerings and market demands, ultimately affecting its competitiveness and profitability.