What effect can poor risk management have on a company’s reputation?

Poor risk management can significantly impact a company's reputation, leading to a loss of stakeholder trust. When a company fails to effectively identify, assess, and manage risks, it can result in adverse events or crises that damage its credibility in the eyes of stakeholders, including customers, investors, and employees.

Trust is a critical component of a company's relationships with stakeholders. If stakeholders perceive that a company does not prioritize or manage risks appropriately, they may question the company's overall competence and reliability. This skepticism can lead to negative publicity, decreased customer loyalty, and ultimately affect the company's bottom line.

In contrast, the other options do not accurately reflect the consequences of poor risk management. Stakeholder trust is unlikely to be enhanced under such circumstances, and downplaying the effect to "no significant effect" overlooks the tangible impact poor risk management can have. Furthermore, the assertion that poor risk management can guarantee financial success is contrary to the reality that it often leads to financial losses and challenges. Therefore, the core issue is that ineffective risk management diminishes the trust and confidence stakeholders have in a company, significantly compromising its reputation.