A credit loan officer at a commercial bank reviews a loan application from a company engaged in coal-fired power generation. The loan officer examines transition risks associated with the company’s business strategy.
What policy risk driver should the loan officer identify?
Policy risk drivers are risks arising from government actions such as changes in legislation, regulations, and other political measures that can impact the operations of a business. The proposal of legislation to mandate the closure of coal-fired power plants directly relates to policy changes that could force the company to cease operations or undergo significant restructuring. Other options such as declining prices of solar panels, lawsuits from activists, and the bank's public image are important factors but do not directly stem from a policy perspective.
The question is asking about policy risk so D is best answer
Reputation is also a transitional risk.
public image is not directly related to policy; typically, government-initiated activities such as legislations, standards, rules, orders, etc are policies. Therefore, the best answer is D.