Introduction:

In a vertically centralized organization, decision-making is concentrated among a small management

team, potentially leading to various risks.

Risk Analysis:

Option A: Lack of coordination among business units is less likely in a centralized structure as

decisions are made by a central authority.

Option B: Inconsistent operational decisions are less common as central management typically

ensures alignment with organizational goals.

Option C: Centralized decision-making can lead to suboptimal decisions due to a lack of diverse

perspectives and delayed responses to local issues.

Option D: Duplication of business activities is less relevant in a tightly controlled central structure.

Conclusion:

The primary risk in a vertically centralized organization is suboptimal decision-making, as the

concentration of authority can result in a lack of responsiveness and consideration of all relevant

factors.

Reference:

Organizational Structure and Internal Control Theory.