What type of risk does external risk refer to?

External risk refers to risks that arise from factors outside the organization that can impact its operations, financial performance, or strategic objectives. These types of risks can include economic fluctuations, natural disasters, regulatory changes, supply chain disruptions, and shifts in consumer behavior, among others. Understanding external risks is crucial for organizations, as they often have less control over these factors, yet they can have significant effects on business continuity and success.

The focus on external risks highlights the importance of external environmental scans and market analysis in risk management practices. By proactively identifying and assessing these risks, organizations can develop strategies to mitigate their potential impact. This understanding helps in comprehensive risk management, ensuring that organizations are prepared to handle challenges that originate outside their own operational framework.