PFMP · Question #256
A portfolio manager has begun work on a new portfolio and is developing the portfolio strategic plan. The organization has a low risk tolerance, and the business strategy is focused on increasing…
The correct answer is C. alignment to organizational strategy. Alignment to organizational strategy is always the primary and most fundamental component selection criterion in portfolio management, regardless of other factors. Even with a financially focused strategy (market share, revenue, profit), components must first demonstrate…
Question
A portfolio manager has begun work on a new portfolio and is developing the portfolio strategic plan. The organization has a low risk tolerance, and the business strategy is focused on increasing market share, revenue, and profits for the organization. As the portfolio manager is selecting potential components, the most important selection criterion is the components':
Options
- Ahigh return on investment (ROI).
- Bbenefit to the organization.
- Calignment to organizational strategy.
- Dlevel of impact to portfolio risk.
How the community answered
(30 responses)- A3% (1)
- B7% (2)
- C80% (24)
- D10% (3)
Explanation
Alignment to organizational strategy is always the primary and most fundamental component selection criterion in portfolio management, regardless of other factors. Even with a financially focused strategy (market share, revenue, profit), components must first demonstrate strategic alignment. High ROI (A) is important but is a subset of alignment - a high-ROI component that doesn't support the strategy should not be selected. Benefit to the organization (B) is too broad and not directly tied to strategy execution. Portfolio risk impact (D) is a consideration, especially given low risk tolerance, but it is a secondary filter after strategic alignment is confirmed.
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