Which is the most serious operational risk facing ABC?

• A. Demand volatility
• B. Regulatory changes
• C. Supply reliability
• D. Labor shortages

Answer: (B)

Regulatory changes as an operational risk come from outside the company but affect how the business must run, often with immediate, wide‑reaching consequences. When new rules arrive, the organization may have to overhaul processes, upgrade systems, change product design, and retrain staff quickly to stay compliant. The cost of not complying can be severe—fines, penalties, product recalls, or even losing the right to operate in a market. Because these changes can strike suddenly and impact multiple parts of the business at once, they can erode profits and disrupt strategy more dramatically than other risks that are more controllable, such as managing demand, ensuring supply, or hiring staff. So regulatory changes create a potential, large-scale disruption to operations that makes them the most serious risk in this context.