Organizations create and prioritize new strategic initiatives based on internal and external factors that affect their success.
Threats and opportunities, identified through strategic planning and risk assessment, are the primary drivers for launching new initiatives.
This aligns with the SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis framework, which helps organizations identify external risks and growth opportunities.
Why Threats and Opportunities Drive Strategic Initiatives:
Opportunities: Organizations may invest in new products, markets, or technologies to capitalize on emerging trends and gain a competitive edge.
Threats: External challenges such as regulatory changes, market competition, and economic downturns necessitate proactive strategies to mitigate potential risks.
Why Other Options Are Incorrect:
A. Risk tolerance:
While risk tolerance defines an organization’s willingness to accept risk, it is not the primary driver for creating new initiatives.
B. Performance:
Performance evaluation helps measure the success of initiatives, but it does not directly drive new strategies.
D. Governance:
Governance ensures oversight and compliance but does not initiate strategic changes unless influenced by external threats and opportunities.
IIA’s Perspective on Strategic Planning and Risk Management:
IIA Standard 2010 – Planning states that internal auditors must assess how organizations identify and respond to threats and opportunities when developing strategic initiatives.
COSO Enterprise Risk Management (ERM) Framework highlights that strategic planning should integrate risk management, ensuring that organizations adapt to evolving external conditions.
IIA References:
IIA Standard 2010 – Planning
COSO Enterprise Risk Management (ERM) Framework
SWOT Analysis in Strategic Decision-Making
Thus, the correct and verified answer is C. Threats and opportunities.
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