A governing body fails to succession-plan for executive leadership. What governance risk exists?

• A. Leadership continuity risk
• B. Operational disruption
• C. Regulatory noncompliance
• D. Market risk

Answer: (A)

Leadership continuity risk arises when there is no succession plan for executive leadership. Without a plan, the organization is vulnerable to a leadership vacuum if current leaders depart unexpectedly or retire, which can stall decisions, shift or derail strategic execution, and erode stakeholder confidence. The board’s role includes ensuring a pipeline of capable successors and clear interim arrangements to maintain stable oversight during transitions, so continuity of leadership is preserved.

Operational disruption can be a downstream consequence of a sudden leadership gap, but the governance risk being described is the potential loss of stable leadership itself. Regulatory noncompliance and market risk are not direct outcomes of failing to plan for succession, even though governance weaknesses can influence those areas indirectly.