What type of risk can arise from external events like economic downturns or natural disasters?

The correct answer identifies external risks as a category that encompasses challenges stemming from events outside of an organization’s control, such as economic downturns and natural disasters. These external risks can significantly impact an organization's operations, financial stability, and overall strategic objectives.

Economic downturns may lead to decreased consumer spending, affecting revenue; similarly, natural disasters can result in physical damage to assets, disruption of supply chains, and increased operational costs. Recognizing these events as external risks is fundamental in risk assessment, as they require organizations to develop contingency plans and risk mitigation strategies that account for factors they cannot directly influence.

In contrast, operational risks typically arise from internal processes, systems, or personnel failures. Strategic risks refer to potential losses that could affect an organization’s long-term goals due to the choices made in the company's strategic direction. Reputational risks involve potential damage to a brand's standing or trustworthiness, which could stem from various internal or external circumstances but do not primarily originate from external events like economic or environmental changes. Thus, the focus on external risks captures the essence of threats posed by unmanageable events in the broader environment.