A Company Sources raw material from One long term supplier without formal contract. Prices U increase un expectedly. What are Risk A. Currency Fluctuation B. Contractual. risk C. Inventory shrinkage D. VAT Jcompliance

The question describes a situation where a company relies on a long-term supplier without a formal contract, leading to unexpected price increases. We need to identify the risk that was most poorly managed.

• A. Currency Fluctuation: This risk relates to changes in exchange rates, which is not directly implied by the scenario of a domestic supplier or the lack of a contract.
• B. Contractual risk: This is the risk associated with the failure of a party to a contract to meet its obligations, or the inadequacy of contract terms. In this case, the absence of a formal contract means there are no agreed-upon terms to protect the company from unexpected price increases, making this the most relevant risk.
• C. Inventory shrinkage: This refers to losses of inventory due to theft, damage, or obsolescence, which is unrelated to supplier contracts or pricing.
• D. VAT Compliance: This relates to adherence to Value Added Tax regulations, which is a tax compliance issue and not directly linked to the supplier relationship or price changes.

The core issue is the lack of a formal agreement to govern the supplier relationship and pricing, which falls under contractual risk.

The correct option is B.
B) Contractual risk