What does strategic risk encompass when assessing public finance?

Strategic risk encompasses the potential for significant negative impact on an organization’s long-term goals and objectives. In the context of public finance, strategic risks can arise from shifts in political landscapes, changes in public policy, economic downturns, or evolving societal needs and priorities. These risks must be managed proactively to ensure that the public finance entity can navigate challenges that may hinder its mission or strategic initiatives.

Understanding strategic risk is crucial because it primarily influences how an organization aligns its resources, formulates policies, and sets priorities to achieve its vision. This type of risk is broader in scope compared to operational risks, which pertain to routine activities, or regulatory risks, which focus on compliance issues. Recognizing the importance of strategic risk allows public finance entities to better prepare for uncertainties that could derail their long-term plans and overall mission, ensuring sustainability and effectiveness in service delivery.