Social Factor Scenarios Affecting Revenue Forecasting:
Revenue forecasting can be influenced by various social factors that impact a company's sales and customer base. Among the given options, consumer boycotts related to controversial sourcing are most likely to directly affect revenue forecasting.
1. Consumer Boycotts: Consumer boycotts occur when customers refuse to purchase a company's products or services due to disagreements with its practices or policies. In the case of controversial sourcing, if a company is perceived to engage in unethical or unsustainable sourcing practices, it can lead to significant public backlash and consumer boycotts. This directly affects the company's revenue as it loses sales and market share.
2. Fines Related to Occupational Health and Safety Failures: While fines due to occupational health and safety failures represent a financial cost and can damage a company's reputation, they typically have a more direct impact on expenses and liabilities rather than immediate revenue.
3. High Employee Turnover: High employee turnover due to poor human capital management affects operational efficiency and costs related to hiring and training. However, its impact on revenue is more indirect compared to consumer boycotts.
References from CFA ESG Investing:
Revenue Impact of Social Factors: The CFA Institute discusses how social factors, such as consumer perceptions and behaviors, can significantly impact a company's revenue. Consumer boycotts can lead to immediate and noticeable reductions in sales, making this scenario particularly relevant for revenue forecasting.
ESG Integration: Understanding the direct and indirect effects of social factors on financial performance is crucial for integrating ESG considerations into revenue forecasting and overall financial analysis.
In conclusion, consumer boycotts related to controversial sourcing are most likely to affect revenue forecasting, making option A the verified answer.
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