Risk Categorization

Correct Answer: Social and Reputation Risk

The best answer for this scenario is 'Social and Reputation Risk.'

This risk category accurately describes the situation because:

1. Ethical concerns: The development of artificial intelligence systems often raises ethical questions about privacy, decision-making, and potential biases.

2. Public perception: How the public views and accepts AI technology can significantly impact the success of the project and the organization's reputation.

3. Social impact: AI systems can have far-reaching effects on society, which falls under the social risk category.

4. Reputation: Public concerns about AI ethics can directly affect the organization's reputation.

The other options are less suitable:

'Technological and Innovation Risk' focuses on technical challenges and innovation-related issues, which are not the primary concern in this scenario.

'Legal and Compliance Risk' relates to regulatory and legal issues, which are not explicitly mentioned in the given scenario.

'Stakeholder Engagement and Communication Risk' is about managing relationships with stakeholders, which is not the main focus of the ethical concerns and public perception issues described.

While these other risk categories may be relevant to an AI project, the scenario specifically highlights ethical concerns and public perception, making 'Social and Reputation Risk' the most appropriate choice.

Correct Answer: Project Management Risks

The correct answer is 'Project Management Risks'. The question refers to a problem with the project scope, which falls under the responsibilities of project management. It has nothing to do with the 'Technical Risks', as it's not about the technology or system used in the project. It is also not about the 'Resource Risks', as the issue discussed does not concern the project's resources like manpower, equipment, or finances. Lastly, it's not about the 'External Business Risks', as it's not related to issues outside the business such as market trends and legal issues. Therefore, poorly defined project scope is categorized under 'Project Management Risks'.

Correct Answer: Strategic Risk

The potential negative consumer response to a new product falls under Strategic Risk. This is because Strategic Risk encompasses decisions about products and services that a company offers. These decisions address how well a company's products will be accepted by the market and its targeted customers. The other categories like Operational Risk, Financial Risk, and Internal Risk, are not the right choices. Operational Risk is directly connected to an organization's operational processes and activities. Financial Risk is related to the financial structure of the firm, its investments, the financial environment and market volatility. Internal Risk is associated with the internal operations of a company, which include employee misconduct or system failures.