A portfolio manager who is developing a probability and impact matrix for a portfolio receives the following data and decides that everything with a score over 0.2 should be highlighted and…

Question

Exhibit

Options

• AOpportunity 1
• BOpportunity 2
• CThreat 1
• DThreat 2

• A
  6% (1)
• B
  78% (14)
• C
  6% (1)
• D
  11% (2)

Explanation

In a probability and impact matrix, each item's score is calculated by multiplying its probability by its impact value. The threshold of 0.2 means only items scoring above that value require attention. Based on the data in the referenced table, Opportunity 2 produces the highest risk score among all items exceeding the 0.2 threshold. In portfolio risk management, items are prioritized by their score-the higher the score, the more urgent the response. Although this is an opportunity (positive risk) rather than a threat, high-scoring opportunities also demand attention because failing to exploit them represents a loss of potential value. The organization should address Opportunity 2 first because it has the greatest potential impact relative to its likelihood.

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