What is the overall assessment of diversification into the e-waste sector for ABC?

• A. Guaranteed success
• B. No effect
• C. Detrimental
• D. Reduces risk but introduces new challenges

Answer: (D)

Diversification reduces exposure to relying on a single line of business by spreading activity into a new area, but it also brings new kinds of risk. Moving into the e-waste sector could diversify ABC’s revenue and tap into a growing, regulation-driven market, which helps spread overall risk and open up growth opportunities. At the same time, e-waste involves heavy regulatory compliance, hazardous materials handling, and specialized processing technologies, all of which require substantial capital, expertise, and robust reverse logistics. These factors create new challenges—higher upfront costs, ongoing compliance obligations, potential operational complexities, and reputational risk if disposal is mishandled. So the overall assessment is that diversification reduces risk but introduces new challenges, which is why that option best captures the trade-off.