What is one major consequence of poor risk management?

Poor risk management can lead to significant financial losses due to unforeseen events or crises that an organization is not prepared to handle. This lack of readiness may result from inadequate identification, assessment, and mitigation strategies for potential risks. When organizations fail to effectively manage risks, they may face unanticipated losses, regulatory fines, or litigation costs, all of which can have a serious impact on their financial health.

Additionally, poor risk management can result in damage to an organization's reputation. Clients, customers, and stakeholders expect organizations to have sound practices in place to safeguard their interests. A failure in this regard can erode trust and confidence, leading to long-term reputational harm, which is often harder to recover from than immediate financial setbacks.

In contrast to this, the other options presented do not correspond directly to the negative outcomes of insufficient risk management. Increased innovation is often a result of effective risk management that allows organizations to explore new ideas confidently. Enhanced employee productivity and stronger stakeholder relationships typically stem from a stable and well-managed environment, rather than from poor risk practices.