Which of the following describes regulatory risks?

Regulatory risks are best described as those associated with the legal and regulatory environment in which an organization operates. These risks arise from changes in laws, regulations, policies, or mandates that can impact a company's operations, financial condition, or strategy. For example, a change in insurance regulations may require firms to alter their pricing structures, compliance processes, or reporting requirements, potentially leading to increased operational costs or litigation.

Choosing this answer highlights the significance of the regulatory landscape in risk management, as organizations must continually monitor and adapt to ongoing changes to mitigate potential adverse effects on their business. This understanding is crucial for risk managers and decision-makers to ensure compliance and strategic alignment with regulatory standards, which is a key component of effective risk management practices.