Ideologies of Portfolio Risk Management

The primary objective of Portfolio Risk Management is to make sure that portfolio components will achieve the best possible success according to the organization’s strategy and business model. From a risk perspective, this is done through the balancing of risks with the management of positive opportunities and negative threats.

A simple approach of avoiding threats and exploiting opportunities may not result in a complete balancing of portfolio risks. Portfolio Risk Management aligns portfolio components, organizational strategy, the business model, and environmental factors toward the objective of portfolio value optimization and results in a synchronized portfolio execution across portfolio components.

Here are 3 principles that that are central to the management of portfolios.

  • Maximize portfolio value while balancing risks
  • Foster a culture that embraces change and risk
  • Navigate complexity to enable successful outcomes

The result of the combination of these three principles allows a balancing of portfolio components through an organized risk assessment process. This process should be proactively implemented by portfolio management to prevent or minimize loss and encourage opportunity exploitation [1].


  1. The Standard of Portfolio Management, Pages 85 – 86

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