A holding's risk contribution is its weight multiplied by how much portfolio volatility changes when that weight changes. Summed across holdings, the contributions add to total portfolio volatility, so it is meaningful to ask what share each position supplies.
A four-asset portfolio at equal capital weights of 25% might show risk contributions of 62%, 21%, 12% and 5%. Equal risk contribution reweights until all four sit near 25% of risk, which means cutting the volatile asset and increasing the quiet ones.
The method needs a covariance estimate, and estimates are noisy. Correlations that look stable in calm markets often jump toward one in a crisis, at which point an ERC portfolio turns out to be far less balanced than its model claimed. See correlation and concentration-risk.
Related: risk-parity, correlation, volatility, mean-variance-optimization, concentration-risk