INSTITUTE OF MANAGEMENT STUDY

NAME- INDRANIL PANJA

CLASS- MBA
SEC-B
SUBJECT-CORPORATE FINANCE
SUBJECT CODE- FM304
ROLL NO-33300921068
 TOPIC -PORTFOLIO RISK MANAGEMENT
DEFINATION:
Project Portfolio Risk Management (PPRM) has been identified as a
relevant area regarding project portfolio success.
This paper reports on a structured literature review of PPRM. A
structured search and selection process was carried out
and conventional content analysis was conducted in the literature
analysis of 62 papers published in international
journals. PPRM has its theoretical and practical bases in the modern
theory of portfolios, decision theory and risk
management (RM). The content analysis reveals four main recurrent
topics in PPRM: (1) The influence of RM on
project portfolio success, based on project portfolio impact level,
moderators or contingency factors between RM and
project portfolio success, and PPRM dimensions; (2) risk and project
interdependencies, highlighting resources,
technology, outcome, value, and accomplishment project
interdependencies; (3) project portfolio risk (PPR)
identification, where four main risk source categories are identified;
and (4) PPR assessment, composed of risk
measures and the main methods used for risk assessment.
Therefore, this study provides an overview of PPRM as a
research field, while it also promotes four future research directions:
(1) PPRM as part of organizational RM; (2) RM,
success dimensions and strategic impact; (3) mechanisms for PPR
assessment, and (4) PPRM as a complex .
The general formula is
Portfolio variance = w12σ12 + w22σ22 + 2w1w2Cov1,2
Where:

w1 = the portfolio weight of the first asset

w2 = the portfolio weight of the second asset
σ1= the standard deviation of the first asset
σ2 = the standard deviation of the second asset
Cov1,2 = the covariance of the two assets, which can thus be
expressed as p(1,2)σ1σ2, where p(1,2) is the correlation
coefficient between the two assets
There are four key steps to the portfolio risk management process. 1)
Identify portfolio risks 2) Analyze portfolio risks 3)Develop portfolio
risk responses 4) Monitor and control portfolio risks — portfolio risks
and mitigation plans should be tracked at Portfolio Governance Team
meetings
There are lots of types of investment risks, both at the portfolio level
and the individual security level. Firstly, the following are examples
of risks that are specific to individual securities. These risks can easily
be managed through diversification:
Liquidity risk
Default risk
Regulatory risk and political risk
Duration risk
Style risk
Broader portfolio risks can affect the entire portfolio. Managing
these risks requires more creative diversification and other
strategies. The following are the main portfolio level risks.
The greatest risk facing any portfolio is market risk. This is also
known as systematic risk. Most assets correlate to some extent. The
result is that a stock market crash will result in most stocks falling. In
fact, most financial assets will lose value during a bear market.
At the other end of the risk spectrum is inflation risk. This is the risk
that a portfolio’s buying power will not keep up with inflation. Thus,
the reason a portfolio needs to include “risky assets” and risk needs
to be managed. Over the long term, owning risky assets allows you
to outperform inflation.
BIBLIOGRAPHY:
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