The correct answer is Erosion of employee morale client loyalty and public confidence.

Erosion of employee morale client loyalty and public confidence describes the broad, lasting consequences of governance risk and compliance failures because it captures damage to trust and internal culture as well as external reputation. When governance breaks down organizations often face reduced customer trust and increased public scrutiny which can lead to lost business, higher remediation costs, and difficulty retaining or recruiting staff. These effects can persist long after any monetary fines have been paid and they often compound operational and strategic challenges.

A temporary decline in revenue is narrower and focuses on a short term financial effect rather than the systemic and reputational harms the instructor emphasized. Revenue fluctuation can occur, but it does not fully capture the long term erosion of trust and morale.

Cloud Audit Logs is a technical control or artifact and not a wide ranging harm. Audit logs are useful for investigation and compliance monitoring, but they do not describe the human and reputational impacts discussed in the case study.

Improved legal protections is incorrect because governance and compliance failures typically increase legal exposure and reduce protections rather than improve them. The instructor spoke about negative outcomes, not benefits.

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