Chapter 22 presented a case study in creating value from uncertainty, and chapter 25 presented the use of efficient frontier analysis in SRM. Assume you are the project lead for the analysis team that uses Efficient Frontier Analysis to evaluate risks of the portfolio presented in chapter 25. How would you explain the results of the analysis to non-technical decision makers? What recommendation would you make, assuming the risk appetite presented in chapter 25? Original Discussion(What’s need to be done) –  As indicated above, assume you are the project lead for the analysis team that uses Efficient Frontier Analysis to evaluate risks of the portfolio presented in chapter 25. How would you explain the results of the analysis to non-technical decision makers? What recommendation would you make, assuming the risk appetite presented in chapter 25? NOTE: These discussions should be informal discussions, NOT research papers. If you MUST directly quote a resource, then cite it properly. The original discussion should be a minimum of 300 words with at least 3 references in APA style. After this, there is an attached document called “Discussion needs responses”. In this document there are three discussions which needs responses. Each response should be a minimum of 150 words.

Efficient Frontier Analysis is a powerful tool for evaluating risks in a portfolio. It allows us to assess the trade-off between risk and return by examining the optimal allocation of assets. In the case study presented in chapter 25, we applied this analysis to the portfolio and obtained valuable insights.

When explaining the results of the analysis to non-technical decision makers, it is important to use language that is easily understandable and avoid jargon. I would start by summarizing the key findings of the analysis in simple terms. For example, I would highlight the risk-return trade-off and explain that certain assets in the portfolio have the potential for higher returns but also come with higher risks. Conversely, there are other assets that offer lower returns but are relatively safer.

To further illustrate this, I would use graphical representations of the efficient frontier, which shows different combinations of assets along the risk-return spectrum. Non-technical decision makers can easily grasp the concept of a curve that plots risk against return and visually identify the portfolio’s position relative to this curve.

The recommendations I would make would depend on the risk appetite presented in chapter 25. If the risk appetite is high, it means that decision makers are willing to accept higher levels of risk in order to potentially achieve higher returns. In this case, I would focus on exploring investment opportunities that lie on the efficient frontier towards the higher risk end. These assets may have the potential for higher returns, but decision makers should be aware of the increased volatility and potential losses.

On the other hand, if the risk appetite is low, decision makers are more concerned about preserving capital and avoiding losses. In this scenario, I would suggest considering investment options that lie on the efficient frontier towards the lower risk end. These assets may provide more stability and lower returns, but they come with a lower chance of significant losses.

It is important to emphasize that the recommendations are based on the analysis using Efficient Frontier Analysis, which provides insights into the risk-return characteristics of the portfolio. However, it is not a crystal ball and cannot predict the future performance of individual assets. Therefore, decision makers should also consider other factors, such as their specific investment goals and time horizons, before making final investment decisions.

In conclusion, Efficient Frontier Analysis is a valuable tool for evaluating risks in a portfolio. When explaining the results to non-technical decision makers, it is important to use clear and simple language, supplemented with visual representations. The recommendations will depend on the risk appetite presented in chapter 25, which will guide decision makers in choosing investment options along the risk-return spectrum.

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