Portfolio Risk Management ◾ 77
9. In order to keep up with and hopefully surpass the competition in your
health insurance company, you realize your portfolio needs some new
components. There have been a large number of customer complaints about
the difculty of signing up for supplemental insurance, the long waits on
the phone, the poor and unfriendly web site, and the difculty in relling
prescriptions. Your company’s executive team has decided it has to invest in
new technology. However, rather than only purchase a slight upgrade, the
executives have elected to use new but unproven sophisticated technology
that will ensure upgrades then will not be needed for ten years. This situa-
tion shows:
a. The willingness to take risks based on high rewards
b. The need to ensure that the selected vendor has a denite commitment
to provide service to sustain the promised benets
c. An emphasis on the long term as it is a low risk but high reward
approach
d. Once the technology is purchased, its installation requires signicant
work in portfolio strategy
10. Your grocery store is considered to be a mid- range store in that it is large, is
not a discount store, and also is not focused exclusively on high- end organic
products. It selects products that consumers desire and discontinues others
that people seem not to purchase. However, it has stores throughout 15 dif-
ferent states, and prices and products offered change constantly. If the store
decides to offer a new product or a new service, such as a health care cen-
ter, or discontinue a service, such as the delicatessen, the risks of doing so
must be considered carefully as part of investment analysis. As the portfolio
manager, you therefore focus on:
a. Benchmarking studies
b. Time- to- market
c. Market- payoff variability
d. Market requirement variability analysis
11. The Portfolio Review Board maintains a record of its decisions. This means
that if it increases the portfolio budget to cover preventive actions to the
portfolio, such as acquiring additional resources to enhance time to market,
once this action is taken, it is necessary to update the:
a. Roadmap
b. Portfolio strategic plan
c. Portfolio management plan
d. Portfolio performance plan