A fund’s inventory of risks may be grouped or organized in different ways. One approach is to
consider risks within two broad categories—investment risk and business operational risk. A
board’s focus, though, should be on the key risks to the funds, and not on each discrete risk that
Investment risk is, in absolute terms, the risk of incurring any loss in the portfolio in pursuit of
investment return, or, in relative terms, the risk of incurring losses greater than, or of earning
gains less than, those of a benchmark index or alternative investment.