What type of risk is associated with decisions on product mix and target markets?

The type of risk associated with decisions on product mix and target markets is strategic risk. This risk arises from the fundamental choices that a company makes regarding its long-term objectives and the resources allocated to achieve those goals. When organizations decide which products to develop or which markets to target, they are engaging in strategic planning. This process inherently involves uncertainty and the potential for failure if the chosen strategy does not meet market needs or align with overall business goals.

Strategic risk is influenced by factors such as changes in consumer preferences, competition, and economic conditions, which can all impact the success of a product or market strategy. Effective management of this risk involves thorough market research and an understanding of the environment in which the organization operates to make informed choices that can lead to a competitive advantage.

In contrast, other types of risk presented in the choices do not directly relate to strategic decisions about products and markets. Operational risk pertains to failures in internal processes and systems, sovereign risk involves financial risks tied to political or economic changes in a country, and liquidity risk refers to the potential difficulty in meeting short-term financial obligations. Thus, the established connection between strategic planning and the resultant risks highlights why strategic risk is the most appropriate designation in this context.