A portfolio manager is developing a comprehensive portfolio management plan and is unsure which performance metrics need to be defined for the portfolio components. The portfolio consists of…

Question

Options

• ADecrease in cost and increase in revenue
• BDegree of strategic alignment and degree of components'risk
• CComponent weighted scoring and degree of strategic alignment
• DComponent weighted scoring and return on investment

• A
  3% (1)
• B
  70% (23)
• C
  18% (6)
• D
  9% (3)

Explanation

Portfolio balancing requires a two-dimensional view: how well each component supports organizational strategy (degree of strategic alignment) and how much risk each component introduces (degree of components' risk). Together, these metrics allow the portfolio manager to make informed trade-offs between value and exposure - the core purpose of balancing. Option A (cost and revenue) captures only financial dimensions and ignores strategic fit and risk. Options C and D both include 'component weighted scoring,' which is a useful technique, but pairing it with strategic alignment or ROI still omits risk - a critical balancing dimension. B is the only option that covers both value alignment and risk, applicable to both internal and external components regardless of type.

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