Portfolio Risk Management

Correct Answer: Exploit the opportunity by allocating adequate resources and actively pursuing its realization

When dealing with high probability and high positive impact opportunities in portfolio management, the best strategy is to exploit the opportunity by allocating adequate resources and actively pursuing its realization. Here's why: The correct answer aligns with best practices in portfolio risk management because: - It takes decisive action on a high-value opportunity - It commits necessary resources to maximize potential benefits - It demonstrates active management of positive risks - It matches the high probability/high impact scenario with an appropriately aggressive response Why other approaches are less effective: - Sharing the opportunity dilutes potential benefits and is more appropriate for medium-impact opportunities or when lacking full capabilities - Enhancing while maintaining current resource allocation is too passive for a high-probability, high-impact opportunity - Accepting passively and monitoring is inappropriate for high-value opportunities and wastes potential benefits In portfolio management, high-probability and high-impact opportunities deserve full commitment of resources to maximize organizational value. Passive or partial responses would represent missed opportunities and suboptimal portfolio management.

Correct Answer: To establish a structured framework for tracking and managing risks across all portfolio initiatives

In a dynamic business environment, the primary purpose of creating a portfolio risk register is to establish a structured framework for tracking and managing risks across all portfolio initiatives. This is the most comprehensive answer as it focuses on the active management and monitoring of risks at the portfolio level. The other options are less suitable because: Maintaining historical records is a secondary benefit and not the primary purpose - it's more reactive than proactive in nature. Creating documentation for compliance is important but represents a narrow focus that doesn't address the broader need for active risk management across the portfolio. Providing financial impact assessments to executives is just one aspect of risk management and too specific to be the primary purpose of a risk register - it doesn't encompass the full scope of risk management needs in a portfolio context.

Correct Answer: Risk network analysis

Risk network analysis is the most appropriate technique for evaluating interconnected risks between portfolio components. This approach is fundamental because it: - Maps the connections and relationships between different portfolio elements - Identifies how risks in one component can affect others - Provides a comprehensive view of risk propagation throughout the portfolio - Enables better understanding of systemic risks - Helps in developing targeted risk mitigation strategies The other options are less suitable because: Component risk severity mapping focuses too heavily on individual risk assessment rather than interconnections. Risk dependency breakdown structure is more focused on hierarchical relationships and lacks the network perspective needed for complex portfolio interactions. Multi-dimensional risk evaluation matrix is overly complex and doesn't specifically address the interconnected nature of portfolio risks in a practical way.