Which of the following are the three main types of risk assessed in public finance?

The three main types of risks assessed in public finance—operational risk, financial risk, and strategic risk—are integral to understanding the various challenges that public sector entities face.

Operational risk pertains to the day-to-day operations of public finance entities, including the risks associated with internal processes, personnel, and systems. This risk category emphasizes the importance of efficient and reliable processes to maintain service delivery and achieve organizational goals.

Financial risk reflects the exposure of public financial entities to adverse financial conditions, such as market fluctuations, interest rate changes, and credit risks. Understanding financial risk allows entities to manage their budgets and funding more effectively, ensuring that they can meet their obligations and sustain operations.

Strategic risk involves long-term decisions and external factors that can impact the overall goals and objectives of public finance organizations. This type of risk is essential to assess because it encompasses the implications of policy changes, economic conditions, and shifts in stakeholder expectations, which can all significantly influence an organization's success.

By identifying and assessing these three types of risks, public finance professionals can develop comprehensive risk management strategies that enhance transparency, accountability, and sustainability in public financial management.